On Nov. 14, the International Energy Agency (IEA) released its November oil market report, projecting an oil oversupply of 1.15 million b/d next year, the highest level since the agency first forecast a 2025 supply-demand gap in April this year, and 40,000 b/d higher than the previous month's valuation difference.

Crude oil prices have fallen 11% since the beginning of October. Currently, Brent crude oil futures are trading close to $72 per barrel.

Oil demand growth slowed

The International Energy Agency (IEA) expects oil demand growth to be less than 1 million b/d in 2024 and 2025, which is well below the 2 million b/d growth in 2023 and the average annual growth of 1.2 million b/d between 2000 and 2019.

Specifically, the IEA raised its 2024 oil demand growth forecast by 60,000 b/d to 920,000 b/d from last month's forecast, while lowering its 2025 oil demand growth forecast by 10,000 b/d to 990,000 b/d. Based on these projections, global oil demand is expected to reach 102.8 million b/d in 2024 and 103.8 million b/d in 2025. According to the IEA, the slower than expected global economic recovery and the substitution of fossil fuels by clean energy are the main reasons for the slowdown in oil demand growth.

At the same time, global oil supply is increasing. The IEA forecasts that the U.S. will lead the five largest oil producers in the Americas in 2024 and 2025, contributing about 1.5 million b/d of additional production, which far outweighs the growth in global oil demand over the same period. The IEA also noted that if the Organization of the Petroleum Exporting Countries (OPEC+) phases out the 2.2 million b/d production cuts over the next 12 months, starting in January 2024, as planned, the oversupply in the global oil market could be even more severe in 2024.

International oil prices are falling

OPEC lowered its oil demand growth forecast for 2024 and 2025 for the fourth consecutive month in anticipation of demand from the world's major economies remaining weak.

According to the latest November oil market report, global oil consumption demand is expected to increase by 1.82 million barrels per day and 1.54 million barrels per day, respectively, compared with the October forecast, which is 107,000 barrels per day and 103,000 barrels per day, respectively. On an adjusted basis, global oil demand is expected to average 104 million barrels per day in 2024 and 106 million barrels per day in 2025.

It is worth noting that OPEC has been optimistic since July 2023, when OPEC first released its oil demand forecast report, and only began to continuously downgrade its demand growth forecast in August this year. The reasons behind this shift include the easing of geopolitical tensions, which has shifted the market's focus from supply-side risks to global economic conditions, insufficient oil demand and adequate supply. International oil prices soared to a high of $80 a barrel in early October, but Brent crude futures fell back to around $72 a barrel in mid-November as fears of an Israeli attack on Iran's energy facilities faded.

The Trump administration is likely to pursue loose fossil fuel policies

As one of the world's largest oil consumers and producers, the outcome of the U.S. election has a significant impact on the global oil market. Analysts pointed out that Trump's return to power may lead to a more accommodative fossil energy policy, including accelerating the approval of domestic oil and gas projects and increasing oil production, which may lead to a decline in international oil prices. Since Trump's election, WTI and Brent crude futures prices have fluctuated and fallen by about 5%.

Against the backdrop of declining volatility in international oil prices, OPEC (Organization of the Petroleum Exporting Countries) plans to increase production have become uncertain. On Nov. 3, OPEC issued a statement saying eight OPEC and non-OPEC producers agreed to extend the 2.2 million b/d voluntary production cut, which was scheduled to end at the end of November, until the end of December. This is the second time the group has postponed its planned production increases, and in September, OPEC+ extended for two months the same size of production cuts that were due to expire at the end of the month, aimed at curbing the decline in oil prices.

If the price of Brent remains around $75 by December, well below the break-even prices of most oil producers, OPEC may delay its production increase again on this ground, or even announce a postponement of the increase without giving a specific reason, as it did on November 3.

|OPEC+ faces the challenge of slowing demand

Although oil demand growth is slowing, the International Energy Agency (IEA) expects supply growth to continue. According to the IEA's forecast, oil production in countries such as the United States, Brazil, Canada and Guyana will increase by 1.5 million b/d this year and next. This means that even if OPEC+ (the Organization of the Petroleum Exporting Countries and its allies) abandons plans to restore production, global oil supply in 2024 will still exceed demand by 1 million b/d.

OPEC+ has previously tried to restart production activities, which have been suspended since 2022, but the group has twice postponed plans to increase production as market conditions remain fragile. Currently, OPEC+ plans to increase production by a modest 180,000 barrels per month starting in January 2025 and will meet on December 1, 2024 to review this decision.