IEA Report Warns of Oil Surplus from OPEC+ Production Increase

In a significant shift, the Organization of Petroleum Exporting Countries (OPEC) has revised its global oil demand growth forecasts for 2024 and 2025, reflecting ongoing uncertainty in the market. The new projection estimates an increase of 2.11 million barrels per day (bpd) for 2024, down from the previously anticipated 2.25 million bpd. This adjustment aligns OPEC's outlook closer to that of the International Energy Agency (IEA), which predicts growth below 1 million bpd, highlighting a growing consensus on the challenges facing global oil demand. The potential for a surplus in the oil market looms as supply increases while demand remains subdued. OPEC+ is expected to restore production cuts starting in October, which could exacerbate the surplus situation. The IEA's August report indicates that while current inventories are struggling to meet summer demand, a stabilization in supply is anticipated in the coming months, particularly as non-OPEC+ countries ramp up production. As the summer driving season wanes, gas prices are projected to decline, although the extent of this decrease remains uncertain. Experts suggest that if OPEC proceeds with its production restoration plans, it could further pressure prices downward. OPEC's recent demand growth revision marks the first acknowledgment of softening expectations, particularly concerning China's oil consumption, which has been a significant driver of global demand. A decision on OPEC's production strategy is expected soon, with market conditions likely influencing whether the group will proceed with its planned increases. The evolving economic landscape may prompt OPEC to reconsider its timeline for restoring production, as analysts continue to monitor the balance between supply and demand.