Oil Market Forecast 2025: Supply Surplus and Strategic Uncertainty

by

Introduction
The global oil market in 2025 is expected to face a delicate balance: demand is rising, but so is supply — possibly tipping into surplus. Key players, including OPEC+ and non-OPEC producers, will significantly influence market dynamics.

Demand Outlook

  • According to the International Energy Agency (IEA), global oil demand is projected to grow by 1.1 million barrels per day (b/d) in 2025. S&P Global
  • Demand is being supported by stronger economic activity in China and the United States. S&P Global
  • However, if OPEC+ maintains current production quotas, the IEA expects a supply overhang of approximately 950,000 b/d in 2025. S&P Global

Supply Dynamics

  1. Non-OPEC Growth
    • Non-OPEC producers are expected to increase production by 1.9 million b/d in 2025, led by the U.S., Brazil, Canada, Guyana, and Argentina. S&P Global
  2. OPEC+ Adjustments
    • Some OPEC+ members are unwinding voluntary production cuts. IEA+1
    • According to Goldman Sachs, eight OPEC+ members may increase output by 550,000 bpd later in 2025. Reuters
  3. Surplus Risk
    • The IEA warns of a potential surplus if supply continues to outpace demand. S&P Global
    • According to some IEA scenarios, the overhang could grow even more in 2026 if cuts are unwound further. IEA

Strategic Implications

  • Price Pressure: An over-supplied market could exert downward pressure on oil prices unless demand accelerates or cuts are reintroduced.
  • OPEC+ Cohesion: The decisions of OPEC+ members will be critical. If they continue easing cuts, the surplus risk grows.
  • Storage and Inventories: A surplus implies higher inventory builds, which could lead to storage challenges and cost pressures.
  • Long-Term Risk: Strategic uncertainty (geopolitics, renewable energy transition) will influence future production and investment decisions.

Risks to the Forecast

  • Demand could underperform if macroeconomic conditions worsen.
  • Supply disruptions (geopolitical risks, sanctions) could tighten the market unexpectedly.
  • Changes in global energy policy (e.g., acceleration of green energy) might reduce long-term demand.

Conclusion
In 2025, the oil market appears to lean toward a soft surplus, driven by rising production outside OPEC+ and the gradual rollback of voluntary cuts. While demand growth provides support, it may not be enough to absorb all incremental supply. For investors, producers, and policymakers, the critical questions will be: how long will OPEC+ maintain discipline, and how will market participants respond if inventories begin to pile up?

Leave a Comment