Oil News: IEA Forecasts 2025 Supply Surplus, Bearish Outlook for Oil Prices

Oil Prices Hold Steady as IEA Projects 2025 Supply Surplus, Dollar Strength Weighs on Demand

Oil futures remained steady on Thursday, as traders assessed the impact of the International Energy Agency’s (IEA) latest monthly report, which predicts a supply surplus by 2025, even if OPEC+ maintains current production cuts. A strong U.S. dollar and heightened U.S. oil production projections added further bearish sentiment, limiting any substantial price recovery.

At 10:14 GMT, Light Crude Oil futures are trading $68.36, down $0.07 or -0.10%.

IEA Predicts Supply Surplus by 2025

The IEA’s report signals a challenging outlook for crude markets, with the agency forecasting that global oil supply will surpass demand by over 1 million barrels per day (bpd) by 2025. This increase in supply will largely come from non-OPEC+ producers, including the United States, Canada, and Argentina, while demand growth is expected to slow. The IEA maintained its 2025 oil demand growth estimate at a moderate 990,000 bpd, down significantly from the 2 million bpd growth seen in 2023. The report attributed the demand slowdown to weaker economic conditions and a post-pandemic stabilization of consumption.

Stronger Dollar Pressures Oil Prices

The U.S. dollar’s rally to a one-year high continued to exert downward pressure on oil prices by making dollar-denominated commodities more expensive for foreign buyers. This dollar strength follows October inflation data and reinforces the Federal Reserve’s cautious stance on rate cuts, which has pushed Treasury yields higher and driven a more risk-averse environment in the oil markets. Phillip Nova’s analyst Danish Lim emphasized that the dollar’s strength is currently the leading factor limiting any upward movement in oil prices.

Rising U.S. Output Dampens Demand Sentiment

The U.S. Energy Information Administration (EIA) increased its 2023 domestic oil output forecast to 13.23 million bpd, setting a new production record and surpassing last year’s levels by 300,000 bpd. Additionally, the EIA raised its global oil production outlook for 2024 to 102.6 million bpd. Despite these production gains, demand forecasts remain soft, with the EIA predicting a modest global demand growth of about 1 million bpd next year. This subdued outlook is influenced by slowing demand from China, which the IEA forecasts will contribute only 140,000 bpd to global growth in 2024, a steep drop from the 1.4 million bpd growth rate seen in 2023.

Market Forecast: Bearish Bias as Supply Outpaces Demand

With a strong dollar, record U.S. output, and the IEA’s supply surplus forecast, the near-term outlook for oil remains bearish. Key resistance levels around $69.21 per barrel suggest limited upside, while downside risk could increase if demand continues to underperform. Unless there is a significant shift in demand drivers or dollar strength, traders may see prices testing lower support levels near $66 in the coming weeks.