 "As Brent crude price trades below $70 per barrel, analysts are backing aviation and tyre stocks and are cautious about paints and oil marketing companies (OMCs). “Oil prices are down over 20 per cent from their recent peak and bode well for sectors")
Global markets are expected to see an oil surplus of 950,000 barrels per day (b/d) in 2025 despite an extended supply cut by OPEC+ nations, the International Energy Agency’s (IEA) has said, a projection which could be favourable for India as large oil glut may lead to lower oil prices. India imports 85 per cent of its crude requirements.
In case the OPEC+ bloc begins unwinding the voluntary cuts from the end of March 2025, this overhang would rise to 1.4 million b/d, the IEA said in its Oil Market Report for December.
“A key uncertainty for the trajectory of OPEC+ crude supply remains the level of compliance with agreed targets, with our estimates showing collective output 680,000 b/d above targets in November,” IEA said.
On December 5, Opec+ nations agreed to extend two sets of voluntary production cuts including the ongoing production cuts of 2.2 million barrels per day (bpd) to the end of March, 2025.
However, officials have allayed fears of sudden change in crude oil prices. They have indicated that Indian refiners remain assured of uninterrupted crude supplies at discounted rates.
The average discount of Russian Urals grade of crude oil to dated Brent have held stable at $12.1 per barrel in the three-months leading up to October, according to Platts, part of S&P Global Commodity Insights.
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Supplies may rise
OPEC+ crude oil production may still rise next year if Libya, South Sudan and Sudan can sustain production and Kazakhstan’s 260,000 b/d Tengiz expansion comes online.
“Globally, the bulk of supply growth will continue to be dominated by non-OPEC countries, with the US, Brazil, Canada, Guyana and Argentina adding more than 1.1 million b/d of crude oil and Natural Gas Liquid (NGL) output between them. The start-up of Saudi Aramco’s Jafurah gas project next year will also boost Saudi Arabia’s NGL supply,” IEA said.
The global demand
But the bigger question for 2025 remains global oil demand.
The abrupt halt to Chinese oil demand growth this year, along with sharply lower increases in other notable emerging and developing economies such as Nigeria, Pakistan, Indonesia, South Africa and Argentina, has tilted consensus towards a softer outlook, IEA said.
“The relatively subdued pace of global oil demand growth is set to continue in 2025, accelerating only modestly from 840,000 b/d in 2024 to 1.1 million b/d, with overall consumption reaching 103.9 million b/d,” the report stressed.
An intergovernmental organisation of 13 major oil-producing nations, such as Saudi Arabia, Iran, Iraq, and Venezuela, among others, Opec has been called a ‘cartel’ by economists. Member countries accounted for an estimated 44 per cent of global oil production and 81.5 per cent of the world’s ‘proven’ oil reserves as of 2018.
Including Russia, ten other nations make up the enlarged Opec+ group.
Opec has implemented total supply cuts of 5.86 million bpd, or 5.7 per cent of global oil demand so far. It had postponed the easing of voluntary production cuts even before the latest announcement. IEA expects additional demand for crude or refined products to possibly come from discretionary inventory builds to bring industry stocks back in line with historical averages and as governments replenish strategic reserves.
As the year draws to a close, oil markets appear relatively calm, with crude oil trading in a $70-75/bbl range.
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