The International Energy Agency (IEA) has highlighted a potential oversupply in the global oil market, which could disrupt OPEC+ efforts to maintain high oil prices through production cuts.
The IEA forecasts significant growth in oil production, primarily driven by the United States and other American countries, which could dramatically increase the world’s spare oil capacity.
This surplus, projected to be around 8 million barrels per day by 2030, could become one of the largest in history, similar to levels observed during the COVID-19 pandemic when oil prices plummeted.
The IEA’s medium-term oil market report indicates that this surplus could challenge OPEC+’s current strategy to manage and support oil prices. The potential excess in supply might lead to a prolonged period of lower oil prices.
OPEC+, a coalition that includes Russia and other producers, has not yet responded to these projections. This situation underscores the complexity of balancing supply and demand in a market influenced by geopolitical and economic factors.
In addition to the anticipated surplus, the IEA predicts a gradual decline in the growth of global oil demand. This slowdown is expected to occur progressively over the decade, with demand peaking around 2029 before slightly contracting in 2030.
The shift towards clean energy technologies, particularly the increase in electric vehicle (EV) sales, is a significant factor contributing to the reduced demand for oil. This transition underscores the broader trend towards renewable energy sources and away from fossil fuels.
OPEC+ has been implementing production cuts for approximately two years to mitigate the risk of an oversupply that could lead to falling oil prices, impacting the economies of its member states. Recently, the group decided to extend these cuts into 2025, with plans to start easing them from October 1.
Despite these measures, oil prices have seen a downward trend in recent months, indicating that the market might already be adjusting to changes in supply and demand dynamics.
The decline in oil prices is evident in the recent performance of major benchmarks. Brent crude has fallen nearly 9% since early April, trading at $83 per barrel, down from $91. Similarly, West Texas Intermediate (WTI) crude has dropped 9% to $79 per barrel, down from nearly $87.
Factors contributing to these price declines include record levels of US oil production, which have increased global supply, and concerns about weak demand in China, the world’s largest oil importer, as well as in other significant economies. These developments reflect the complex interplay between production levels, geopolitical events, and economic conditions in shaping the global oil market.
