Robert Harvey and Enes Tunagur
LONDON (Reuters) - The world's oil supply will be faster than expected this year as Saudi Arabia and other OPEC+ members relaxed output cuts, the International Energy Agency (IEA) said on Thursday.
The IEA expects global supply to increase by 1.6 million barrels per day this year, up 380,000 barrels from previous forecasts, and the agency said in its monthly report that it advises industrialized countries.
OPEC+ added a rougher market at the pace of the latest cuts in May and June after the group decided to relax its latest output tier cuts in May and June. Additional supplies and concerns about President Donald Trump’s tariffs have brought oil prices to four-year lows earlier this month.
Although the IEA raises its forecast for oil demand growth this year to 740,000 bpd, growth will slow to 650,000 bpd for the rest of the year, from 990,000 bpd in the first quarter.
"Signs of global oil demand growth may have appeared," the IEA said, adding that economic headwinds coupled with sales of electric vehicle sales (EVs) are weakening demand.
Saudi Arabia is the only country that can return barrels to market based on current production levels, after OPEC+ agreed to accelerate monthly output increase for the second month at the last meeting.
The IEA said that total oil demand averaged 103 million barrels this year, and the revised rate of 103.4 million BPD last month also rose from 103.4 million BPD last month, citing an updated historical demand estimate for some countries including Egypt and Nigeria, and a 20,000 bpd increase in demand.
Even after these changes, the IEA's forecast for surplus in the global market will not change much, increasing to about 730,000 bpd, slightly larger than last month's 710,000 bpd, according to Reuters' calculations in the report.
Next year, the IEA believes that demand growth averages 760,000 bpd and supply growth increased by 970,000 bpd, which also means surplus.
Lower prices affect shale, others
Also in the report, the IEA increased its forecast for U.S. shale oil growth by 40,000 bpd in 2025, while the price of 190,000 bpd in 2026 was lower.
"Recently, one of the most direct effects of the decline in oil prices is expected to decline on U.S. shale production," it said.
"We expect more activity in the coming quarters," it said, adding that large independent shale players have announced 14 rigs for the year.
On Wednesday, the group of the Oil Exporting Countries (OPEC) forecasts oil supply growth for the U.S. and other producers outside the OPEC+ group in 2025.
Lower oil prices also impact Russia as monthly oil revenues fell to their lowest level since June 2023, down at $13.2 billion in April, the IEA said.
According to the IEA, Russia's revenue fell, although production increased by 170,000 barrels per day to 9.3 million barrels, while exports reached 150,000 bpd to 7.6 million bpd.
Record the outlook for electric vehicle sales to hit demand
In 2025, electric vehicle sales will exceed 20 million, accounting for about a quarter of global auto sales, marking an annual record for soaring sales in China, the IEA said.
China alone will reach 14 million electric vehicle sales in 2025, the IEA said.
Despite increased EV sales, the IEA lowered its forecast for oil demand displacement to 5 million BPD in its 2025 EV Outlook report, down from the 6 million BPD reported in the previous report. EVS' oil displacement is approximately 1.3 million BPD in 2024.
(Reported by Robert Harvey and Alex Lawler in London; Editors of Tomasz Janowski, Jan Harvey and David Evans)