The IEA now expects a smaller—but still hefty—Oil surplus in 2025, as softer OPEC+ output and firmer demand narrow the gap. Yet with the bloc producing well above requirements, prices continue to drift lower despite the report’s modest positives, Commerzbank's commodity analyst Carsten Fritsch notes.

OPEC+ output slippage narrows imbalance

"The International Energy Agency continues to forecast a significant supply surplus for next year. However, this is expected to be slightly smaller than previously anticipated. Based on the forecast for demand for OPEC Oil and the assumption that OPEC production will remain at current levels, the Oil market would be oversupplied by an average of 3.4 million barrels per day during the year."

"The previous forecast was for more than 4 million barrels per day. The smaller surplus is due to slightly stronger demand, slightly lower non-OPEC supply, and lower OPEC production. The latter fell by 250,000 barrels per day to 29 million barrels per day in November. Since September, OPEC+ production has fallen by around 1 million barrels per day."

"A key reason for this is Russia, which produced 500,000 barrels per day less than agreed in November, which is why OPEC+ production was also slightly below the agreed volume. Nevertheless, OPEC+ continues to produce significantly more Oil than is needed. This may explain why Oil prices continued to fall despite the positive surprises in the IEA report."