The global oil market might be tighter than it seems, according to the International Energy Agency (IEA).
In its latest monthly report released on Friday, the agency noted that while supply and demand figures suggest a surplus, rising refinery activity aimed at meeting summer travel and power-generation needs is actually tightening the market, Reuters reported.
The IEA, which provides energy policy guidance to industrialised nations, has revised its forecast for global oil supply, now expecting an increase of 2.1 million barrels per day (bpd) in 2024, 300,000 bpd more than it had previously projected.
Meanwhile, global oil demand is expected to rise by only 700,000 bpd, indicating what appears to be a significant surplus.
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However, the agency emphasized that this apparent surplus doesn’t reflect the real situation.
“The decision by OPEC+ to further accelerate the unwinding of production cuts failed to move markets in a meaningful way given tighter fundamentals,” the report said.
“Price indicators also point to a tighter physical oil market than suggested by the hefty surplus in our balances.”
The IEA added that the latest output boost from OPEC+, announced on Saturday, has had little impact on the market so far.
Despite increased production, oil ministers, energy executives from OPEC nations, and leaders of Western oil companies have noted that inventories are not rising, which suggests that demand remains strong.
Looking ahead to 2025, the IEA projects oil demand growth at 720,000 bpd, about 20,000 bpd lower than its previous forecast, while supply is expected to grow by 1.3 million bpd.
This also implies a continued surplus on paper, but, as the IEA notes, market fundamentals may paint a tighter picture in reality.
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Image Credit: Malay Mail
