Market News

By Giulia Petroni

The International Energy Agency anticipates an acceleration in global oil-demand growth this year, but still expects the market to be in surplus.

The Paris-based organization forecasts global demand to grow by 1.05 million barrels a day in 2025 from 1.1 million barrels a day previously, reaching an average of 104 million barrels a day on lower prices and an improving economic outlook in developed countries.

After months of weaker growth, oil demand picked up in the fourth quarter of last year, rising by 1.5 million barrels a day--the strongest since the fourth quarter of 2023. Demand growth in 2024 was assessed at 940,000 barrels a day, higher than the agency's latest estimate of 840,000 barrels a day.

"World oil demand recovered some momentum in 4Q," the IEA said. "A combination of lower fuel prices, colder weather in key Northern Hemisphere regions and burgeoning U.S. petrochemical activity underpinned these stronger deliveries."

Growth this year is expected to exceed last year's but to remain below the 2023 level of over 2 million barrels a day. The agency's projections are also substantially lower than OPEC's, as the cartel currently expects demand to grow by 1.45 million barrels a day.

In China, oil-demand growth accelerated in November largely due to higher consumption of gasoil, with diesel pump prices averaging their lowest in almost three years. "Gasoil's rebound dovetails with nascent signs that sentiment around China's property slump, now in its fourth year, may be bottoming out," the agency said.

Chinese oil demand is expected to grow by 220,000 barrels per day this year from a 180,000-barrel-a-day increase in 2024.

Global oil prices started the year with strong momentum, boosted by expectations of stronger heating fuel demand due to colder temperatures and a fresh round of U.S. sanctions against Russia's energy sector.

Wednesday's IEA report comes as Brent crude trades around $80 a barrel, while the U.S. oil gauge, West Texas Intermediate, is around $77 a barrel. Crude futures soared to multi-month highs earlier this week after the Biden administration in the U.S. imposed sweeping sanctions on two major Russian producers and dozens of vessels shipping Russian oil.

Traders fear the measures could disrupt the market, forcing the Kremlin's top buyers, China and India, to seek alternative supplies from the Middle East and other regions. Prices are also supported by expectations that the U.S. will enforce stricter sanctions on Iran when President-elect Donald Trump takes office.

Current U.S. sanctions on Russia and Iran could tighten crude and product balances, as they affect entities that operated over a third of Russian and Iranian crude exports last year, the IEA said.

The nearly 160 Russian tankers sanctioned by the U.S. shipped more than 1.6 million barrels a day of Russian oil last year--over a fifth of the Kremlin's seaborne exports. The full impact of the measures is still uncertain, but the agency said they could significantly disrupt Russian supply and distribution chains.

Sanctions on Iran's shadow fleet cover vessels that transported an average of over 500,000 barrels a day of its crude in 2024, nearly one-third of the country's seaborne crude exports, according to the IEA.

Global oil supply rose by 20,000 barrels a day in December, led by Nigeria and Libya, with OPEC+ additions offsetting non-OPEC+ declines. Supply is expected to rise by 1.8 million barrels a day this year, reaching a total of 104.7 million barrels a day on average, even if OPEC+ doesn't unwind voluntary production cuts.

"If decreases in supply from weather impacts, sanctions or other developments become substantial, oil stocks can quickly be drawn to meet operational requirements in the near term," the agency said.

Non-OPEC+ producers are expected to add 1.5 million barrels a day of supply this year--the same as in 2024--with growth led by the U.S., Brazil, Guyana, Canada and Argentina. OPEC+ members could also unwind some of their voluntary production cuts and ramp up output, if needed.

"Those additions should cover both potential supply disruptions and expected demand growth," the IEA said.

Write to Giulia Petroni at [email protected]