Oil Prices Drop as IEA Forecasts Growth in Supply
Oil prices have fallen in the global market amid concerns over heightened supply risks, as the International Energy Agency (IEA) projected growth in global crude supply despite recent European Union sanctions on Russia.
Brent crude declined by 0.15% to $73.20 per barrel, while the US benchmark West Texas Intermediate also dropped to $69.71 per barrel. The IEA’s latest report, released on Thursday, forecasted a rise in global oil supply by 1.9 million barrels per day (bpd) to 104.8 million bpd in 2025, even with OPEC+ output cuts still in place.
Supply and Demand Outlook
The IEA also anticipated global demand to increase by 1.08 million bpd, reaching around 103.9 million bpd. However, it forecasted a supply surplus next year, driven by non-OPEC+ countries, which are expected to boost supply by about 1.5 million bpd.
The IEA’s prediction of a surplus is compounded by geopolitical uncertainties, particularly in the Middle East, which continue to pose risks to crude oil supply from the region.
Economic Factors and Dollar Strength
A strengthening US dollar further contributed to the decline in oil prices. As the dollar appreciates, oil, which is priced in dollars, becomes more expensive for holders of other currencies. The US dollar index rose 0.14% to 106.84, adding pressure on oil prices.
Despite the price decline, oil demand remains supported by expectations of increased economic activity in both the US and China, the world’s largest oil consumers. The likelihood of a 25-basis-point rate cut by the US Federal Reserve at its meeting on December 18 is seen as a factor that could boost economic activity and drive oil demand.
Meanwhile, China is expected to announce a stimulus package aimed at boosting economic growth, which could further support oil demand.
