Global oil demand growth set to accelerate in 2025

The International Energy Agency (IEA) has released its December 2024 Oil Market Report, projecting a notable acceleration in world oil demand growth for 2025.

After an increase of 840,000 barrels per day (b/d) in 2024, global oil demand is expected to rise by 1.1M b/d next year, reaching an estimated 103.9M b/d.

Petrochemical feedstocks are expected to dominate the demand increase for both years, while the growth in demand for transport fuels will continue to be restricted by both behavioural changes and technological advances.

Although demand growth in non-OECD countries, particularly in China, has significantly slowed, emerging economies in Asia are expected to continue to drive oil demand growth in 2024 and 2025.

However, the report notes the overall pace of global oil demand growth remains subdued compared with previous years, with the overall increase expected to be modest. In terms of oil supply, the global market saw a rise of 130,000 b/d in November 2024, bringing the total oil supply to 103.4M b/d. This increase was primarily driven by a recovery in output from Libya and Kazakhstan.

The IEA forecasts a further supply increase of 630,000 b/d for the current year, followed by a 1.9M b/d rise in 2025, which will bring total oil supply to 104.8M b/d. Much of this growth will come from non-OECD countries, particularly the United States, Brazil, Guyana, Canada and Argentina.

Refinery throughput is also expected to reach a peak in December, with a significant annual rise of 3M b/d from October.

The report highlights global oil inventories fell by 39.3M barrels in October, driven by a sharp decline in oil products as refinery activity lagged behind demand. This marks a period of tight supply that could continue into 2025, especially with the decision by OPEC+ to delay the unwinding of its additional voluntary production cuts.

OPEC+ ministers have agreed to extend these cuts, which were initially introduced in November 2023, until at least March 2025.

This delay comes amid rising geopolitical tensions and a slowdown in global oil demand, particularly in China.

While this decision reduces the potential for supply overhang next year, uncertainties about OPEC+ production quotas remain, especially considering current overproduction from certain members.

Looking ahead, the IEA’s analysis points to an uncertain trajectory for OPEC+ crude oil production, particularly in light of compliance with production targets. Despite these uncertainties, the overall market is expected to remain comfortably supplied in 2025.

The IEA’s forecast assumes the additional production cuts will continue to delay any return to higher output until a final phase-out timeline is confirmed.

As 2024 drew to a close, oil markets were relatively calm, with crude oil trading in a US$70-US$75 per barrel range.

However, the report concludes with a reminder of the volatility that can quickly disrupt the market, emphasising the importance of a continued focus on oil security.