Oil market appears increasingly swollen following OPEC+ production increase, according to International Energy Agency
Global Oil Market Forecast for 2025-2026
The International Energy Agency (IEA) has released a report predicting a surge in global oil supply in the coming years, which could lead to lower prices and potentially constrain demand growth.
According to the IEA, the world's third and fifth largest oil producers, Russia and Iran, may face additional sanctions that could curb their supplies. However, the IEA expects continued Chinese stockbuilding to help absorb any potential oil supply surplus.
The IEA forecasts a further increase of 1.9 million barrels per day (bpd) in oil supply in 2026, with supply growth led by non-OPEC producers such as the U.S., Canada, Brazil, and Guyana. The agency expects global refinery runs to rise by 670,000 bpd to 83.6 million bpd in 2025 and by a further 470,000 bpd to 84 million bpd in 2026.
OPEC, on the other hand, maintains its forecast for demand to rise by 1.29 million bpd this year, almost double the IEA figure. However, the IEA expects supply to exceed demand by almost 3 million bpd next year, driven by growth from outside the wider OPEC+ group and a limited expansion in demand.
The IEA predicts an increase in world oil supply this year and next, with a rise in oil supply by 2.5 million bpd in 2025, up from 2.1 million bpd previously. This expected increase in supply is primarily due to OPEC+ countries, which have accelerated production increases. OPEC is expected to unwind production cuts a year ahead of schedule by September 2025, adding roughly 547,000 bpd in September alone and continuing higher output into 2026.
As a result of this growing surplus, global oil prices are forecast to decline. Brent crude is expected to drop below $60 per barrel by the end of 2025 and average around $50-$58 per barrel through 2026 according to the EIA and Goldman Sachs forecasts. This price decline could also temper oil demand growth, particularly in regions sensitive to price fluctuations, and may lead to lower domestic production in non-OPEC+ areas such as the U.S.
The IEA also expects a faster transition to renewable energy sources than some other forecasters. The agency expects global crude oil refining rates to approach a fresh all-time high of 85.6 million bpd in August, but this growth may be tempered by the expected decline in oil prices.
In summary, the larger-than-expected increase in OPEC+ oil supply combined with only moderate demand growth is likely to create an oversupplied market in 2025 and 2026, driving global oil prices down and potentially constraining demand growth over this timeframe. This forecast could have significant implications for oil-producing and consuming nations alike.
References: [1] IEA (2022). Oil Market Report. Available at: https://www.iea.org/reports/oil-market-report [2] EIA (2022). Short-Term Energy Outlook. Available at: https://www.eia.gov/outlooks/steo [3] Goldman Sachs (2022). Commodities Outlook. Available at: https://www.goldmansachs.com/insights/pages/commodities-outlook/ [4] BP (2022). Energy Outlook. Available at: https://www.bp.com/en/global/corporate/energy-economics/energy-outlook.html
- The surge in global oil supply, as forecasted by the International Energy Agency (IEA), could have significant implications for various industries and economies across Europe, as lower oil prices may affect both energy and finance sectors.
- The IEA anticipates an increase in world oil supply in 2026, with the energy sector expecting a further rise of 1.9 million barrels per day (bpd), primarily driven by non-OPEC producers such as the United States and other European countries like Canada, Brazil, and Guyana.
- The expected decline in global oil prices according to the EIA and Goldman Sachs forecasts could lead to a slowdown in the oil-and-gas industry across the world, including in Europe, where sensitive regions may see a decrease in oil demand growth. simultaneously, the shift towards renewable energy sources, as anticipated by the IEA, could also affect Europe's business and industry sectors in the long run.