OPEC+ Increases Oil Output Faster Than Anticipated, Causing Supply Surplus Amid Sluggish Demand Growth

The International Energy Agency (IEA) announced on Wednesday that global oil supply is anticipated to increase at a faster pace than previously estimated for both 2023 and 2024. This surge is attributed to increased production from OPEC+ members and growing output from sources outside the group.

In its latest monthly report, the IEA predicts an additional 2.5 million barrels per day (bpd) in supply for 2025, a significant increase from the previous forecast of 2.1 million bpd. For 2024, the agency expects a further 1.9 million bpd increase.

The increased output comes as OPEC+ decides to unwind its latest round of production cuts more rapidly than initially scheduled. This additional supply, combined with economic concerns surrounding President Donald Trump’s tariffs, has contributed to oil’s decline this year.

However, the IEA expects demand growth to be relatively sluggish. It predicts a rise in global oil demand by 680,000 bpd in 2023 and 700,000 bpd in 2024, representing a decrease of 20,000 bpd compared to the previous forecast.

The IEA noted that demand across major economies remains weak, with a significant rebound appearing unlikely in the near future. The agency linked its higher output forecast to increased production targets from OPEC+.

The IEA’s demand projections sit at the lower end of industry expectations, as the agency anticipates a faster transition towards renewable energy sources compared to other forecasters. OPEC currently maintains its forecast for demand growth to reach 1.29 million bpd in 2023 – more than double the IEA’s estimate.

Following the IEA’s report publication, oil prices continued to fall, with Brent crude trading below $66 per barrel. The report suggests that supply could potentially exceed demand by nearly 3 million bpd in 2024, driven primarily by growth from outside the broader OPEC+ group and a limited expansion in demand.

Non-OPEC producers will continue to drive supply growth in 2023 and 2024 due to increased output in the United States, Canada, Brazil, and Guyana, according to the IEA.

However, potential additional sanctions on Russia and Iran could potentially curb supplies from these significant global producers, the IEA warned. The U.S. imposed new sanctions on Iran last month, and the European Union lowered a price cap for Russian oil as part of its latest sanctions against Moscow.

“It is clear that something will have to give for the market to balance,” the IEA said in the report.

Continued Chinese stockpiling due to major institutional and policy developments aimed at enhancing energy security could help absorb the surplus, according to the agency. This has been a factor supporting prices earlier in the year, analysts have suggested.

Despite lowering its demand forecast, the IEA expects global crude oil refining rates to approach a fresh all-time high of 85.6 million bpd in August, following a peak of 84.9 million bpd in July. Global refinery runs are expected to rise by 670,000 bpd, to 83.6 million bpd, in 2025; and by an additional 470,000 bpd, to 84 million bpd, in 2026, primarily due to better-than-expected data for the Organisation for Economic Co-operation and Development (OECD) and China.