There will be an excess of oil in large quantities, unless the world experiences a sort of black swan that turns everything upside down. This is what emerges from the monthly report of the International Energy Agency (IEA) for the month of November, which underlines for the umpteenth time that the weakness of demand (consumption of crude oil) and the solidity of supply (production) generate an imbalance. this is already reflected in prices, but it could have an even greater impact. The surplus will be historic (not counting covid), since in the next four quarters there will remain on average around one million barrels per day.
To give this data some context, Spain’s daily oil demand is around 1.3 million barrels per day. It is worth remembering that Spain continues to be the fourteenth largest economy in the world, although it has lost several positions in recent years. Thus, in the coming quarters there will remain every day a quantity of oil similar to that which all of Spain needs to cover its needs. All of this, including OPEC’s huge cuts, which will remain in effect until January 2025. The IEA estimates that even if OPEC decided to never return to these limits, its production would remain in excess of crude oil. It must be taken into account that all OPEC reductions total just over 3 million barrels per day, that is, this is unused capacity that could be activated at any time. moment if the cartel negotiations failed somewhere.
This year, demand will only increase by 920,000 barrels, to 102.8 million barrels per day (mb/d). In 2025, it will only increase by a modest million barrels, to reach 103.8 mb/d. On the contrary, the offer is much healthier. Global oil supply increased by 290,000 barrels per day (mb/d) in October to 102.9 mb/d, since the return of Libyan barrels arrival on the market more than offset the decline in supplies from Kazakhstan and Iran. OPEC+ has delayed implementing additional voluntary production cuts until January at the earliest. Non-OPEC+ producers will increase their supply by around 1.5 Mb/d in 2024 and 2025.
Oil is overflowing and the price is falling
In total, the price of crude oil fell to around $71 per barrel, in the case of Brent, the benchmark in Europe. From the IEA, they admit that “investors and oil market participants have refocused their attention on fundamental factors, such as weak Chinese demand, the resumption of Libyan crude production and the planned reduction in production cuts of OPEC+, which suggests good developments.” supply the oil market in 2025,” notes the IEA report.
Oil demand increased by almost 2 mb/d last year and by 1.2 mb/d per year, within the average observed between 2000 and 2019. But demand for crude oil is entering a new era, the China’s sharp slowdown has been the main drag on demand, and its growth this year is expected to average only a tenth of the 1.4 mb/d increase in 2023. In fact, “Chinese demand contracted for the sixth consecutive month in September, bringing the average for the third quarter of 2024 to 270 kb/d less than the previous year,” underlines the IEA..
The supply is in great health
Meanwhile, global oil supply is increasing at a healthy pace. After the US elections in early November, “we continue to expect the US to lead non-OPEC+ supply growth, with an increase of 1.5 Mb/d in 2024 and 2025, as well as as an increase in the production of Canada, Guyana and Argentina. “Due to unplanned outages and poor operational performance this year, Brazil is expected to be an important source of growth next year,” the report said.
Brazil is expected to increase its supply by 210 kb/d to 3.7 mb/d in 2025, as more than 800 kb/d of the new capacity it is installing offshore comes online. The total growth of the five producers will more than cover the expected growth in demand in 2024 and 2025.
However, the IEA believes that no one will be able to reverse this excess crude oil: “Our current balance sheets suggest that even if OPEC+ cuts remain in force, global supply will exceed demand by more than 1 mb/d l next year. » , indicates the report from the institution which belongs to the OECD.
