The International Energy Agency (IEA) has projected that global crude oil supply may surpass demand by approximately 1 million barrels per day (mb/d) in 2025. The increasing trade tensions and the winding down of production cuts by OPEC+ are contributing to uncertainty in the market, which is dampening oil demand growth.
In its monthly oil market report for March 2025, the IEA stated, “Our current balances suggest global oil supply may exceed demand by around 600,000 b/d this year. If OPEC+ extends the unwinding of output cuts beyond April without reining in supply from members currently overproducing versus their targets, another 400,000 b/d could be added to the market.” Additionally, the report highlighted the unclear scope and scale of tariffs and the ongoing trade negotiations, making it too early to assess the impact on the market outlook.
The US Energy Information Administration (EIA) reported that the Brent crude oil spot price averaged $75 per barrel in February, which was $4 lower than January and $8 lower than the same time last year.
The IEA report noted that benchmark crude oil prices fell in February and early March due to concerns about the economy, global oil demand growth, escalating trade tensions, and OPEC+ announcing the unwinding of production cuts. Amid discussions of a potential ceasefire and peace deal in Ukraine, ICE Brent futures declined by $11 per barrel over the past eight weeks, trading near three-year lows around $70 at the time of writing.
The IEA emphasized that recent oil demand data have fallen short of expectations, with growth estimates for Q4 2024 and Q1 2025 marginally downgraded. The escalating trade tensions between the US and other countries have tilted macroeconomic risks to the downside, contributing to the uncertainties in the market outlook.
On the supply side, any potential ceasefire in the Russia-Ukraine conflict could reintroduce Russian oil volumes into the market. The US is forecasted to be the largest source of crude oil supply growth in 2025, followed by Canada, Brazil, and Guyana.
The US EIA expects that global oil inventories will start building in the July-September quarter of 2025. This is anticipated to lead to rising oil supply outpacing global consumption, resulting in inventory accumulation and downward pressure on prices through the forecast period. The EIA forecasts the Brent crude oil price to decline to $66 per barrel in December 2026, averaging $68 in 2026.
Overall, the uncertainties surrounding trade tensions, OPEC+ production cuts, and macroeconomic conditions are expected to continue impacting the global oil market and prices in the coming years.
