The International Energy Agency has delivered a stark warning that global oil markets face unprecedented oversupply as OPEC+ production increases collide with weakening demand across major economies. The agency’s latest forecast reveals a dangerous imbalance where supply growth dramatically outpaces consumption, creating what officials describe as increasingly “bloated” market conditions. This supply-demand mismatch threatens to destabilize oil prices and reshape global energy dynamics as producers flood markets with additional crude while economic uncertainty dampens consumption. The IEA’s assessment signals a potential paradigm shift in oil markets that could have far-reaching implications for energy security and economic stability worldwide.
A supply surge of oil is outpacing global demand
World oil supply will rise more rapidly than expected this year and next as OPEC+ members further increase output and supply from outside the group grows, the International Energy Agency said on Wednesday.
Supply will rise by 2.5 million barrels per day (bpd) in 2025, up from 2.1 million bpd previously forecast, the IEA, which advises industrialised countries, said in a monthly report, and by a further 1.9 million bpd next year.
OPEC+ is adding more crude to the market after the Organization of the Petroleum Exporting Countries, Russia, and other allies decided to unwind its most recent layer of output cuts more rapidly than earlier scheduled. The extra supply, along with concern about the economic impact of President Donald Trump’s tariffs, has weighed on oil this year.
Supply is rising far faster than demand in the IEA’s view. It expects world oil demand to rise by 680,000 bpd this year and 700,000 bpd next year, both down 20,000 bpd from the previous forecast.
Market balance concerns arise as forecasts predict a reduced demand
“The latest data show lacklustre demand across the major economies and, with consumer confidence still depressed, a sharp rebound appears remote,” the agency said in the report that linked its higher output forecast to increased OPEC+ production targets. “Oil market balances look ever more bloated.”
IEA demand forecasts are at the lower end of the industry range, as the agency expects a faster transition to renewable energy sources than some other forecasters. OPEC on Tuesday maintained its forecast for demand to rise by 1.29 million bpd this year – almost double the IEA figure.
Oil prices LCOc1 extended losses after the IEA published its report at 0800 GMT, with Brent crude trading lower than $66 a barrel.
The widening gap between IEA and OPEC demand projections highlights fundamental disagreements about global energy consumption patterns and the pace of the transition to renewable sources, creating uncertainty that complicates investment decisions and market planning. The IEA’s consistently bearish outlook reflects its expectation that economic headwinds, including trade tensions and geopolitical uncertainties, will continue to suppress oil consumption growth across developed and emerging markets.
Surplus implications of higher OPEC+ production
The report implies that supply may exceed demand by almost 3 million bpd next year, driven by growth from outside the wider OPEC+ group and a limited expansion in demand.
Despite higher OPEC+ production, non-OPEC producers will continue to lead supply growth this year and next owing to rising output in the U.S., Canada, Brazil, and Guyana, according to the IEA.
Still, additional sanctions on Russia and Iran may curb supplies from the world’s third and fifth largest producers, the IEA said.
“It is clear that something will have to give for the market to balance,” the IEA said.
The IEA’s warning of an oversupplied oil market represents a critical inflection point that could reshape global energy economics. The agency’s forecast of bloated market balances suggests that traditional supply management strategies may prove insufficient to maintain price stability in an era of structural demand weakness. OPEC+ faces the difficult choice between defending market share through increased production or supporting prices through continued output restraint.
GCN.com/Reuters