No need to worry about the Israel-Palestine conflict? IEA's latest forecast: Oil supply will significantly exceed demand this year!

At a time when local geopolitical crises typically drive up oil prices, the International Energy Agency (IEA) has issued an unexpected signal: Global oil market supply will remain ample in 2025, provided there are no severe disruptions to Middle Eastern crude oil supply.

On Tuesday, the IEA predicted in its latest report that global oil production will increase by 1.8 million barrels per day to 104.9 million barrels per day by 2025, while demand is expected to be only 103.8 million barrels per day. This supply surplus of 1.1 million barrels per day will lead to a continued accumulation of global oil inventories throughout the year. The supply growth is driven by two factors: OPEC+ is reversing its previous production cuts, and non-OPEC+ producers are expected to increase production by an average of 1.4 million barrels per day over the year.

Meanwhile, the agency has lowered its oil consumption growth forecast for this year to 720,000 barrels per day, down from the previous forecast of 740,000 barrels per day, as weak U.S. consumption will suppress global demand.

Inventory data further corroborates the trend of ample supply. The IEA noted that since February, global oil inventories have been increasing by an average of 1 million barrels per day, with a "significant" increase of 93 million barrels in May alone. Although total inventories remain 90 million barrels lower than the same period last year, the upward momentum is unmistakable.

The "Limited Impact" of the Middle East Crisis: Geopolitical Risks Fail to Shake Supply Fundamentals

In its latest monthly market report, the IEA pointed out that the conflict between Israel and Iran — including Israel's first attack on Iranian energy infrastructure — has led to oil price volatility and raised concerns about potential disruptions to traffic in the critical Strait of Hormuz in the Persian Gulf.

However, the IEA emphasized that "at the time of writing this report, Iranian oil flows have not been affected."

Iran partially suspended production at the world's largest gas field, South Pars, following Israel's airstrikes over the weekend, but it remains unclear whether production has truly been impacted. Although the oil storage and refining facilities in Shahran, near Tehran, were also targeted, the report indicated that there was no damage.

Additionally, the IEA stated that as the global growth engine of this century, China's demand is expected to peak in 2027, driven by a surge in electric vehicle sales, ongoing high-speed rail construction, and the promotion of natural gas trucks.

Another report released by the agency on Tuesday reiterated that the supply surplus situation may persist for the remainder of this decade. In the IEA's 2030 outlook, global oil demand is expected to grow by only 2.5 million barrels per day between 2024 and 2030, reaching a "plateau" of 105.5 million barrels per day by the end of this decade. Meanwhile, global capacity is projected to surge by more than 5 million barrels per day to 114.7 million barrels per day