The IEA monthly report indicates that although the situation in the Middle East has led to increased risks to oil supply, the global market's supply situation remains relatively abundant, and there will still be a surplus next year. The International Energy Agency (IEA) released its latest monthly report, downgrading this year's global oil demand forecast but upgrading next year's expectations. The report stated that ample supply offset the geopolitical risks faced by oil production, but it is ready to take action if necessary (regarding the tense situation between Iran and Israel), as the IEA's public oil stockpile exceeds 1.2 billion barrels. The IEA emphasized oil security in this monthly report, pointing out the impact of the Middle East's tense situation on oil prices, but believes that oil supply continues to flow, and the market will face a surplus next year if there are no significant disruptions.

Oil Supply and Demand Situation

Global oil demand is expected to increase by less than 900,000 barrels per day in 2024 and close to 1 million barrels per day in 2025, significantly slowing down compared to the post-pandemic annual increase of about 2 million barrels per day from 2022 to 2023. The report mentioned that China is the main factor in the slowdown, accounting for about 20% of global growth this year and next year, while this proportion was close to 70% in 2023.

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Global oil supply fell sharply by 640,000 barrels per day to 10.28 million barrels per day in September, mainly due to Libya's political predicament disrupting the country's oil production and exports, coupled with field maintenance work in Kazakhstan and Norway reducing production. The supply growth of non-OPEC+ countries is expected to be about 1.5 million barrels per day this year and next year, with the Americas region accounting for 80% of the increase.

In September, refining profits further declined, with the crack spreads of gasoline, jet fuel, and diesel worsening, while crude oil prices rose due to a tightening market. As a result, global crude oil processing volume is expected to decrease further by 180,000 barrels per day to 82.8 million barrels per day in 2024 and by 210,000 barrels per day to 83.4 million barrels per day in 2025, achieving annual increases of 5.4 million barrels per day and 6.1 million barrels per day, respectively.

In August, global visible oil inventory decreased by 22.3 million barrels, with crude oil inventory falling by 16.5 million barrels. OECD industrial inventory reduced counter-seasonally by 13.4 million barrels to 2.811 billion barrels, 102.7 million barrels lower than the five-year average. Preliminary data shows that oil inventory continued to decline in September. Relatively strong refining activities and OPEC+ production cuts have driven a reduction of 135 million barrels in crude oil inventory since May, while finished product inventory increased by 35 million barrels during the same period.

Brent crude futures rose by $8 per barrel at the beginning of October. Investors unwinding their overly bearish trading positions also contributed to the price rebound. Prior to this, prices fell to multi-year lows in September due to expectations of ample market supply in 2025. As of the time of writing the report, Brent crude was trading at around $78 per barrel.

Oil security has become a focus.Benchmark oil prices rebounded significantly in early October, with the risk of oil supply once again becoming a focal point. The escalating tensions between Israel and Iran have raised concerns about a broader Middle East conflict and potential disruptions to Iranian exports. However, the resolution of political disputes in Libya has eased the situation, which had temporarily halved its oil exports. Hurricanes along the U.S. Gulf Coast have had some impact on oil production, but the damage has been relatively mild, and with weak demand from end-users, the market situation is gradually stabilizing. As of the time of writing this report, Brent crude futures are trading at around $78 per barrel, up $8 per barrel from the previous month, but still more than $10 per barrel lower than the same period last year.

The surge in oil prices earlier this month stemmed from market attention to Israel's next moves, particularly whether Iran's key energy infrastructure would become targets for attacks. Iran's main export terminal—Kharg Island—with a daily production of 1.6 million barrels, primarily supplying China, has become one of the focal points of concern. Similarly, the potential spillover effects of the strategic waterway, the Strait of Hormuz, are also a cause for worry. Although oil exports from Iran and its neighbors are currently unaffected, the market remains highly tense, awaiting further developments. Meanwhile, Libya's crude oil shipments have resumed, with oil exports that were interrupted due to political disputes having been resolved through difficult negotiations.

On the other hand, the activity of this year's hurricane season in the United States is higher than normal, with six weeks still remaining. Against the backdrop of heightened risks to the security of oil supply, the global market's supply situation remains relatively abundant—a point we have emphasized for quite some time. Global oil demand is expected to grow by less than 900,000 barrels per day in 2024 and by about 1 million barrels per day in 2025, well below the 2 million barrels per day increase in 2023. In particular, China's oil demand has been weak, with consumption in August down by 500,000 barrels per day year-on-year, marking the fourth consecutive month of decline. At the same time, non-OPEC+ oil supplies, led by American countries, continue to grow steadily, with an expected increase of about 1.5 million barrels per day this year and next. The United States, Brazil, Guyana, and Canada are expected to contribute most of the increase, with production increasing by more than 1 million barrels per day over the two years, which is sufficient to cover the expected demand growth.

Excluding Libya, Iran, and Russia, OPEC+'s spare production capacity is at a historically high level (with the exception of the special period during the COVID-19 pandemic). In September, OPEC+'s effective spare capacity easily exceeded 5 million barrels per day. Global oil inventories provide further cushioning, although global crude oil inventories have decreased by 135 million barrels over the past four months, reaching the lowest level since at least 2017, and OECD industry stocks are well below the five-year average. However, global refined product inventories have risen to a three-year high, putting pressure on profits in major refining centers.

As the supply situation evolves, the IEA is ready to take action if necessary. As was the case in 2022, the IEA and its member countries can take collective action swiftly. The IEA's public stocks alone exceed 1.2 billion barrels, with an additional 500 million barrels in stocks held under industry obligations. China also holds 1.1 billion barrels of crude oil inventories, enough to cover the current domestic refinery operating needs for 75 days. Currently, the oil supply continues to flow, and without significant disruptions, the market will face a substantial surplus next year.