Highlights

• World oil demand growth is set to accelerate from 840 kb/d in 2024 to 1.1 mb/d next year, lifting consumption to 103.9 mb/d in 2025. Increases in both years will be dominated by petrochemical feedstocks, while demand for transport fuels will continue to be constrained by behavioural and technological progress. While non-OECD demand growth, notably in China, has slowed markedly, emerging Asia will continue to lead gains in 2024 and 2025.
• Global oil supply rose by 130 kb/d m-o-m to 103.4 mb/d in November, up 230 kb/d y-o-y, on a continued recovery in Libyan and Kazakhstan output. Total oil supply is on track to increase by 630 kb/d this year and 1.9 mb/d in 2025, to 104.8 mb/d, even in the absence of unwinding of OPEC+ cuts. Non-OPEC+ supply rises by about 1.5 mb/d in both years, led by the United States, Brazil, Guyana, Canada and Argentina.
• Refinery throughputs will reach an annual peak of 84.3 mb/d in December, nearly 3 mb/d more than in October when maintenance and economic run cuts constrained activity. Crude runs will average 82.7 mb/d in 2024 and 83.3 mb/d in 2025, up by 520 kb/d and 620 kb/d, respectively. Margins improved in Asia in November as middle distillate cracks strengthened, but lower gasoline and naphtha values muted them in the Atlantic Basin.
• Global observed oil inventories drew by 39.3 mb in October, led by an exceptionally sharp decline in oil products (-82.3 mb) as low refinery activity coincided with a rise in global oil demand. OECD industry stocks declined by 30.9 mb to 2 778 mb, 91.6 mb below the five-year average. Preliminary data for November show global inventories rebounded, led by oil on water and non-OECD crude oil.
• Benchmark crude oil futures were largely unchanged in November, at around $73/bbl for ICE Brent. Prices traded in a relatively narrow $5/bbl range, as concerns oscillated between oil supply security and faltering oil demand growth. Volatility slumped to six-month lows, with the front-month Brent futures moving by a daily $0.87/bbl on average during November.

An uneasy calm

The decision by OPEC+ to delay the unwinding of its additional voluntary production cuts by another three months and extend the ramp-up period by nine months through September 2026 has materially reduced the potential supply overhang that was set to emerge next year. Even so, persistent overproduction from some OPEC+ members, robust supply growth from non-OPEC+ countries and relatively modest global oil demand growth leaves the market looking comfortably supplied in 2025.

Ministers of the eight OPEC+ countries that had agreed extra output reductions of 2.2 mb/d in November 2023 confirmed at last week’s meeting a further delay in restoring these volumes to the market. The postponement was the third since September and came against a backdrop of heightened geopolitical tensions that have raised potential supply risks and slowing global oil demand growth led by China. The cuts will now, at the earliest, be phased out from the end of March 2025 through September 2026.

Yet the latest OPEC+ decision does not remove the uncertainty about when the unwinding of the cuts will actually start. In this context, our forecasts exclude a return to higher production quotas until a final phase-out timeline is confirmed. On that basis, our current market balances still indicate a 950 kb/d supply overhang in 2025. If OPEC+ does begin unwinding the voluntary cuts from the end of March 2025, this overhang would rise to 1.4 mb/d. A key uncertainty for the trajectory of OPEC+ crude supply remains the level of compliance with agreed targets, with our estimates showing collective output 680 kb/d above targets in November.

OPEC+ crude oil production may still rise next year if Libya, South Sudan and Sudan can sustain production and as Kazakhstan’s 260 kb/d Tengiz expansion comes online. Globally, the bulk of supply growth will continue to be dominated by non-OPEC+ countries, with the US, Brazil, Canada, Guyana and Argentina adding more than 1.1 mb/d of crude oil and NGL output between them. The start-up of Saudi Aramco’s Jafurah gas project next year will also boost Saudi Arabia’s NGL supply.

While the market is closely assessing ongoing geopolitical tensions and evolving OPEC+ supply dynamics, the bigger question for 2025 remains global oil demand. The abrupt halt to Chinese oil demand growth this year – along with sharply lower increases in other notable emerging and developing economies such as Nigeria, Pakistan, Indonesia, South Africa and Argentina – has tilted consensus towards a softer outlook. In a break from recent trends, non-OECD oil demand in 3Q24 was up only 320 kb/d y-o-y, its lowest quarterly growth rate since the height of the pandemic, while OECD countries posted an increase of 190 kb/d y-o-y in the same quarter.

The relatively subdued pace of global oil demand growth is set to continue in 2025, accelerating only modestly from 840 kb/d in 2024 to 1.1 mb/d, with overall consumption reaching 103.9 mb/d. Additional demand for crude or refined products could come from discretionary inventory builds to bring industry stocks back in line with historical averages and as governments replenish strategic reserves. As the year draws to a close, oil markets appear relatively calm, with crude oil trading in a $70-75/bbl range. But, as recent years have shown, market shocks can arrive with little or no warning, making close attention to oil security as important as ever.

Source: IEA