IEA oil market 2025: surplus supply, weaker demand, and price pressures

lobal oil prices have plummeted to their lowest levels in three years, with Brent crude trading at around $70 per barrel. The decline is largely attributed to economic uncertainty, exacerbated by escalating trade tensions that have weakened global market sentiment. Investors remain cautious, as concerns over slowing demand growth persist. Additionally, OPEC+ has announced plans to ease its voluntary production cuts starting in April, which has heightened expectations of a well-supplied market throughout 2025. These factors have collectively contributed to the downward pressure on oil prices, raising concerns among oil-producing nations and industry stakeholders.

Global oil supply surplus expected

The International Energy Agency (IEA) has forecast a global oil surplus of approximately 600,000 barrels per day (bpd) in 2025. This surplus projection follows a downward revision of global oil demand growth, which is now expected to increase by only 1 million bpd, significantly lower than previous estimates. The majority of this demand growth is expected to come from Asia, particularly China, where the petrochemical industry remains a key driver.

However, should OPEC+ proceed with fully unwinding its voluntary production cuts, the global surplus could expand by an additional 400,000 bpd, further pressuring prices. Non-OPEC+ countries, particularly the United States, Brazil, and Canada, are also expected to ramp up production, which may contribute to a supply-demand imbalance. Analysts suggest that unless demand recovers more robustly, the oil market may face prolonged oversupply, potentially leading to further price declines.

Weaker demand growth forecast

The IEA has highlighted weaker-than-expected oil demand growth, citing macroeconomic headwinds and structural shifts in energy consumption. While demand is still projected to grow, it is not keeping pace with supply increases. In addition to China’s petrochemical sector, India and other emerging markets in Asia are expected to drive demand growth. However, economic slowdowns in major economies such as the Eurozone and North America, coupled with efficiency improvements and the ongoing transition to renewable energy, are limiting overall demand expansion.

The transportation sector, traditionally a key driver of oil demand, is experiencing a shift due to rising electric vehicle (EV) adoption and stricter emissions regulations. While aviation and petrochemicals continue to support demand, these factors are not sufficient to offset the broader slowdown. As a result, the IEA warns that global oil consumption growth in 2025 could be even weaker than currently projected if economic conditions deteriorate further.

OPEC+ and non-OPEC production trends

Global oil supply saw a decline of 950,000 bpd in January 2025, bringing total production to 102.7 million bpd. The decrease was largely driven by seasonal weather disruptions in North America, as well as unplanned output declines in Nigeria and Libya. Despite this temporary drop, total supply remains 1.9 million bpd higher than a year ago, with the Americas leading production gains.

Looking ahead, the IEA expects global oil supply to rise by 1.6 million bpd to reach 104.5 million bpd in 2025. The bulk of this growth will come from non-OPEC+ producers, particularly the United States, Brazil, and Guyana, as they continue to expand production. If OPEC+ maintains its voluntary output cuts, its influence over the market may weaken, giving non-OPEC+ countries greater control over global supply dynamics.

Inventory levels and market implications

Global observed oil inventories declined by 17.1 million barrels in December, reflecting shifting supply and demand trends. Crude oil stocks saw a sharp drop of 63.5 million barrels, while refined product stocks increased by 46.4 million barrels. OECD industry inventories continued their downward trend, falling by 26.1 million barrels to 2.737 billion barrels—placing them 91.1 million barrels below their five-year average.

Preliminary data for January suggests further declines in global stockpiles, driven primarily by a significant crude stock draw in China. The drop in inventories has raised questions about near-term market balances, with some analysts suggesting that any unexpected supply disruptions—such as geopolitical tensions or refinery outages—could quickly tighten markets and cause price volatility.

The IEA’s latest report indicates that the global oil market in 2025 will be shaped by an ongoing supply surplus and weaker-than-expected demand growth. While ample supply has contributed to lower oil prices, the potential for geopolitical disruptions, OPEC+ policy shifts, and economic uncertainty could still influence market stability. As non-OPEC+ producers continue to expand their output, the balance of power in global oil markets is shifting, with long-term implications for pricing and production strategies. In the coming months, industry observers will closely watch how these dynamics unfold, as any significant changes in supply or demand expectations could reshape the outlook for global oil markets.