A surplus amid transition: crude oil’s evolving landscape

Ram luffing cranes from Liebherr at work in the offshore oil industry

Global oil markets are bracing for a significant surplus exceeding one million barrels per day in 2025.

This is primarily due to a notable decline in Chinese demand and increased production from non-OPEC+ countries. According to the International Energy Agency (IEA), however, this development is expected to stabilise prices despite ongoing geopolitical tensions, including conflicts in the Middle East. All told, the IEA anticipates a “well-supplied market in 2025.”

That said, China, a longstanding driver of global oil consumption, has experienced a contraction in demand for six consecutive months through September. Once the end-of-year data is in, the IEA projects that China’s oil demand growth for 2024 will land at just 10 per cent of the rate observed in 2023.

Toril Bosoni, head of oil industry and markets at the IEA, noted that factors such as the transition to electric vehicles, expansion of high-speed rail networks and increased use of alternative energy sources are contributing to this decline – a shift that ultimately suggests China’s oil demand may have already reached its peak.

Further demonstrating that global trends toward clean energy are influencing oil demand, the IEA also reported that year-end data is anticipated to reveal that worldwide oil consumption is expected to increase by only 920,000 barrels a day in 2024, a significant decrease from 2023. In 2025, however, demand is expected to grow by 990,000 barrels a day.

Some downs

While explanations vary slightly, this slowdown is primarily attributed to subdued economic conditions and the rapid adoption of clean energy technologies, which are increasingly replacing oil in transportation and power-generation sectors. In fact, the IEA forecasts that oil demand growth could plateau by the end of the decade, as renewable energy and electric vehicles become more widespread.

On the supply side, countries that include the United States, Brazil, Canada and Guyana are projected to have collectively increased oil production by 1.5 million barrels per day in 2024. This surge is expected to contribute to the anticipated surplus, even if the OPEC+ alliance resumes previously halted production. To that end, the 23-member coalition, which includes major producers like Russia and Saudi Arabia, has postponed planned production increases twice in 2024 due to market fragility.

Growth forecast

On a productive note, OPEC recently forecasted per-day growth for 2025 at 1.8 million barrels – nearly double the IEA’s estimate – which indicates a more optimistic outlook compared to other market observers.

Either way you look at it, it’s important to understand the oil industry is at a pivotal juncture – facing the dual challenges of adapting to a global energy transition and managing geopolitical uncertainties. With that in mind, producers and policymakers are tasked with balancing the immediate need for supply stability against the long-term goal of a sustainable energy future. Moreover, the IEA’s alignment with ASME P30.1 standards reflects efforts to ensure industry-wide continuity and safety, a sentiment echoed in global energy policies that prioritise sustainability and innovation.

As 2024 comes to a close, the anticipated surplus in oil supply, coupled with declining demand, underscores the evolving dynamics of the energy market. While consumers may benefit from stabilised prices, oil-dependent economies could face challenges. The rapid advancement of clean energy technologies and slowing economic growth in key markets are exerting pressure on the oil industry to evolve.

The IEA’s latest report highlights the importance of understanding clean energy while navigating the complexities of current oil market dynamics. For industry leaders, adaptation and innovation will be crucial in steering through the coming decade.