Bloomberg

The emerging outlook for global oil markets next year suggests prices are set to come under pressure.

In the past few weeks, forecasters such as the International Energy Agency have rolled out initial projections for 2025. They indicate that, while oil demand will rise further from this year’s record levels, the pace of growth is cooling.

It will slow worldwide to 1.1 million barrels a day in 2025, half the rate seen during the post-pandemic rebound last year, the IEA says. Consumption will be more than satisfied by a supply surge of 1.6 million barrels a day, coming mostly from the Americas, the agency estimates.

At first glance, that’s set to leave global markets with a moderate surplus. But the real picture is even more fragile because the IEA assumes the OPEC+ alliance led by Saudi Arabia will keep withholding roughly 2 million barrels of daily output. If that’s restarted, the overhang swells.

Some Wall Street analysts are outlining an even shakier scenario. The flood of new supplies outside OPEC+ may total 1.8 million barrels day in 2025, according to Natasha Kaneva at JPMorgan Chase & Co., almost double the expected growth in consumption.

What does this mean for crude prices?

Well, despite an incendiary mix of record fuel demand, Middle East conflict, sanctions on Russia and OPEC+ supply cuts, international benchmark futures have retreated 8% from this year’s peak to trade near $84 a barrel in London.

Citigroup Inc. believes the looming glut signals “downward pressure for prices,” while JPMorgan forecasts Brent crude will slip below $70 in the final quarter of 2025. Goldman Sachs Group Inc. and Morgan Stanley are a little more upbeat, seeing the market anchored near current levels.

That may offer some respite for consumers after the rampant inflation of the past few years. But for oil-producing countries and companies — and bullish investors — 2025 is shaping up to be a rough ride.

–Grant Smith, Bloomberg News