IEA cuts 2025 oil demand forecast, lifts supply view

The Paris-based organization cut its projections for next year’s oil-demand growth to 980,000 barrels a day from 1 million barrels a day previously, saying it now sees total demand at an average of 104 million barrels a day.

Demand in OECD countries is facing a structural decline as the industry adopts energy-efficiency measures and rolls out electric vehicles, while economic growth remains weak despite major central banks starting to cut interest rates, it said in its latest monthly report.

This year, demand is expected to grow by 970,000 barrels a day, slightly above the previous forecast of 960,000 barrels a day, driven by developing nations. Total demand is estimated to reach an average of 103.1 million barrels a day.

In the second quarter, growth slowed to 710,000 barrels a day, the lowest quarterly increase in over a year, the IEA said. In China, oil consumption contracted in both April and May, while demand for industrial fuels and petrochemical feedstocks was particularly weak.

The global slowdown reflects a normalization of growth rates after the fluctuations caused by Covid-19 in recent years, according to the agency. For instance, demand for jet fuel is now rising toward its midyear peak as flight activity increases over the summer. However, year-on-year growth is slowing sharply compared to levels in 2023, when the final stages of the post-pandemic recovery in air travel took place.

The gap between the IEA’s and the Organization of the Petroleum Exporting Countries’ projections is now even wider, as the cartel forecasts global oil-demand growth of 2.2 million barrels a day this year and 1.8 million barrels a day in 2025.

Thursday’s report comes as Brent crude trades around $85 a barrel, while the U.S. oil gauge, West Texas Intermediate, is around $82 a barrel.

Crude prices returned to positive territory after slipping earlier this week, buoyed by the latest U.S. data showing crude and gasoline inventories fell during the July 4 holiday week. However, uncertainty about the path of interest rates in the U.S. and concerns over the demand outlook in China following disappointing consumer prices data for June are capping gains.

Total oil supply is now forecast at an average of 103 million barrels a day this year and 104.8 million barrels a day in 2025, higher than the IEA’s previous estimates of 102.9 million barrels a day and 104.7 million barrels a day, respectively. Non-OPEC+ countries are still set to lead global supply, the agency said, with production now expected to grow by 1.5 million barrels a day in 2024 and by 1.8 million barrels a day in 2025.

The IEA said it will adjust its supply forecast for OPEC+ when the alliance confirms it will unwind some of its voluntary output curbs, as laid out in a roadmap presented to markets in June. The cartel and its allies agreed to extend voluntary curbs of 2.2 million barrels a day to the end of September and said they aim to gradually unwind them from October 2024 to September 2025, contingent on market conditions.

OPEC+ production is currently forecast to fall by 740,000 barrels a day this year if the group keeps its voluntary output cuts in place, according to IEA estimates.

Meanwhile, Russia’s crude exports fell by 160,000 barrels a day in June to 7.6 million barrels a day, while commercial revenue fell by $190 million compared with the previous month to $16.7 billion.

Russia’s crude oil supply was relatively steady at 9.22 million barrels a day in June but still 240,000 barrels a day above targets set in line with OPEC+. Production from the group’s 18 countries subject to quotas was 580,000 barrels a day above an implied target of 33.85 million barrels a day in June, the IEA said.

Write to Giulia Petroni at giulia.petroni@wsj.com