Strong demand coupled with supply risks, the IEA predicts that the oil surplus will ease this year.

The International Energy Agency (IEA) said in its monthly report on Wednesday that the global oil market is facing less surplus than previously expected this year due to strong demand and new supply risks. The IEA stated that global oil inventories will increase by 725,000 barrels per day in 2025, instead of the previously predicted 950,000 barrels per day. The agency slightly raised its global consumption forecasts for 2024 and 2025. The IEA said, "In December, there was a significant drop in temperatures in Canada, northern and central United States. Prices also received a boost as traders considered multiple supply risks." The report stated that the comprehensive new sanctions announced by the Biden administration last week could "seriously disrupt Russia's oil supply and distribution chain." The IEA also said that if the incoming Trump administration fulfills its commitments to take a tougher stance, Iran's oil exports could also be restricted. The agency added that it is too early to predict the specific extent of potential losses, but if the losses are significant enough, it may prompt other OPEC+ member countries to continue with their production recovery plans. Toril Bosoni, head of the IEA's oil industry and market division, said, "With supply risks from Russia and Iran facing disruptions, OPEC may have room to cancel production cuts, as they have hinted at plans to cancel cuts in 2025." Supply crises and winter weather have pushed up oil prices at the start of the new year, with Brent crude futures rising above $81 per barrel on Monday, reaching a five-month high. The report stated that cold weather may affect North American oil production, further depleting the already low stocks at the Cushing storage center in Oklahoma. The report also noted that oil inventories in developed countries are at their lowest levels since August 2022. The IEA raised its global consumption forecasts for 2024 and 2025 by 100,000 barrels per day. With slight improvement in economic outlook, demand growth this year will slightly accelerate to 1.05 million barrels per day, reaching an average level of 104 million barrels per day. Supply this year is expected to grow at a rate of 1.5 million barrels per day, the same as in 2024, led by oil-producing countries in the Americas such as the United States, Brazil, Canada, Guyana, and Argentina. If OPEC+ gradually resumes production from the second quarter as planned, the global supply surplus this year could be more severe than expected. Starting in April, OPEC, led by Saudi Arabia, plans to increase production by around 120,000 barrels per day each month, but may review the plan in early March before proceeding. The report showed that in December last year, the alliance's oil production increased slightly from 41.40 million barrels per day to 41.67 million barrels per day, with several member countries exceeding their agreed targets. The U.S. Energy Information Administration (EIA) on Tuesday predicted that as OPEC eventually resumes production and production continues to grow in the United States, Canada, and Guyana, the oversupply in the oil market will worsen by 2026.