Less is better: IEA cuts global oil supply growth forecast for 2025

The International Energy Agency has lowered its global oil supply forecast for this year by 0.1 million barrels per day (bpd) to 1.8 million bpd, the IEA said in a report. Thus, according to the organization's new forecast, global oil supply in 2025 will be 104.7 million bpd even if OPEC+ maintains its voluntary cuts, up 1.7% from its 2024 estimate. How such forecasts, as well as anti-Russian sanctions will affect the cost of oil and the ruble - in the material of "Izvestia".

Short-term effect

The change in the IEA forecast will not affect the fundamental value of oil and the ruble, causing only some short-term effects on the stock exchange, said "Izvestia" researcher of the laboratory of structural research IPEI RANHIGS Vladimir Eremkin. In the medium term, the balance of supply and demand is important.

- The decline in supply volumes may be compensated by a drop in demand for oil this year due to some slowdown in the global economy and the economies of some major countries, mainly China," the expert said.

From Russia's point of view, the main risk is a drop in physical export volumes due to sanctions, which may put additional pressure on the ruble.

Valuation

According to the forecasts of various analytical agencies, the average price of Brent oil in 2025 is expected to be in the range of $70-80 per barrel, Denis Astafiev, founder of the investment company SharesPro, told Izvestia. The World Bank expects $73 per barrel, the European Commission - $73.1 per barrel, and the consensus forecast of analysts is $76 per barrel.

- My expectations for the current year - a possible decline in prices to $60 per barrel, - said the expert. - The ruble exchange rate is traditionally correlated with oil prices, although this dependence has weakened in recent years. Nevertheless, higher than expected oil prices may support the ruble.

According to the expert, the revision of the IEA forecast will have only a minor impact on the oil market and the ruble exchange rate. The dynamics will be more influenced by the geopolitical situation, OPEC+ decisions on production volumes and global economic growth rates.

A slight decrease in the oil supply forecast will reduce the pressure on prices, Evgeny Mironyuk, stock market expert at BKS Investment World, told Izvestia. The current market surplus, which emerged when non-OPEC+ countries increased production, will be reduced. The revision of the supply volume also corresponds to the logic of demand reduction on the part of China (relative to 2023).

Probably, according to him, the main oil consumer in Asia - China - has passed the peak of demand in 2023, and in 2025 will rapidly continue to develop alternative energy and stimulate sales of hybrids and electric cars. At the same time, global demand, according to the IEA forecast, will still increase by 100k b/d relative to the previous forecast to 1.05mn b/d.

- Our forecasts for the average price of Brent crude oil for 2025-2026 have not changed: $70 and $75 per barrel, respectively. The current price jump is due to temporary factors: geopolitics and uncertainty caused by sanctions against Russian oil and transportation companies. We also maintain our estimate of Urals discount to Brent at $5 per barrel and forecasts of Urals at $65 and $70 per barrel for the two indicated years, respectively," he said.

Sanctions pressure

The reduction in the volume of additional global oil supply in the IEA's forecast for 2025 by 0.1 million barrels per day is an intangible technical adjustment, which the authors do not emphasize in their report, Philip Muradyan, senior director for corporate ratings at Expert RA, noted in a conversation with Izvestia. The report does not yet take into account the possible consequences of the US sanctions imposed on January 10, which are aimed at removing a part of Russian oil exports from the world market.

- Moreover, the point nature of the sanctions was probably chosen specifically to reduce oil supply by the amount that the world market can easily replenish from other producers - for 2025, the IEA predicts an excessive supply of oil even taking into account the existing voluntary restrictions within OPEC+, - said the expert.

Thus, according to him, the authors of the sanctions probably intended to avoid an explosive rise in oil prices, which is not happening now. Sanctions on the tanker fleet make it difficult to circumvent these restrictions, and we see that already now buyers from China and India are busy buying oil from alternative suppliers. What part of the sanctioned Russian oil exports will be able to return to the market later on is unknown to anyone at the moment, but we can definitely say that this is a negative factor for the ruble exchange rate.

The data on global supply and demand of the International Energy Agency and OPEC traditionally have significant discrepancies - more than 1 million bpd, Tamara Safonova, Associate Professor at the Institute of Economics, Mathematics and Information Technology of the Presidential Academy, explained to Izvestia.

- The IEA confirms the growth of demand in 2025 by 1.06 million b/s relative to 2024, which indicates the absence of a trend of global displacement of traditional energy carriers and replacement by alternative energy," she said. - The January OPEC report has not been released yet, but the assessment of global oil demand by this organization is traditionally higher than the IEA forecasts.

Participants of the world stock market, according to her, are unlikely to react to the IEA report with a significant change in quotation values, the main factor influencing the pricing of oil at the moment is the destructive sanctions pressure, disrupting the established supply chain of Russian oil to world markets.

On the eve of the announcement of the next package of US sanctions against the Russian energy sector led to a rapid rise in oil prices. Within a couple of days, Brent quotes jumped to $81 per barrel, which is the maximum for the last four months.

New policy

In 2025, there will be no reduction in supply on the oil market, Oleg Kalmanovich, chief analyst at Neomarkets, told Izvestia. We forecast the exact opposite picture. The main reason is Donald Trump and how carefully he will fulfill his election promises.

- The US president-elect promised full support for the industry from the authorities for production growth. Thus, some regulatory restrictions, including environmental ones, will be lifted, oil producers will receive tax preferences for activation of geological exploration, as well as freezing of royalties for subsoil use in federal territories," he explained. - By doing so, the US will seek to collapse the oil market and prevent Russia from receiving the planned oil revenues.

However, he said, this is a double-edged sword: oil in the U.S. is mostly shale oil, and its extraction requires more costs than in many exporting countries. A $40-a-barrel profit will not satisfy the interests of oil corporations, and Trump will have to deal with it further - possibly through direct subsidies from the budget.

"Izvestia sent an inquiry to the Ministry of Energy, but at the time of publication no response had been received.