By Patience Chat Moses
The global oil market is caught between a flood of new supply and a stubbornly sluggish demand picture. According to the International Energy Agency’s (IEA) latest report, a dramatic reversal of fortune is underway, and the consequences for prices and market stability are becoming increasingly apparent.
For months, the IEA has been consistently trimming its forecasts for global oil demand, and the August report continues this trend. While demand is still expected to grow by around 680 thousand barrels per day in 2025 and 700 thousand barrels per day in 2026, these figures are far from earlier projections.
The primary reason for the downgrade is due to disappointing performance in key non-Organisation for Economic Co-operation and Development (OECD) economies like China, India, and Brazil, where consumption has been weaker than anticipated. In the developed world, demand has been flat, with Japan’s consumption hitting multi-decade lows.
However, a key highlight of the report is the strong demand growth in Africa. The IEA notes that all of the demand growth in the second quarter of 2025 came from non-OECD countries, with consumption in Nigeria being a standout performer. Thanks to a sharp pickup in economic activity driven by wide-ranging domestic reforms, Nigeria’s oil demand is projected to increase by 100 kb/d in 2025, making it the second-largest source of demand growth after India.
On the supply side, the story is one of rapid expansion. Global oil supply was relatively stable in July, but the outlook has been dramatically revised upward for the rest of 2025 and into 2026. The main catalyst for this shift was a decision by eight OPEC+ members on August 3rd to fully unwind their voluntary production cuts, adding another 547 kb/d to the market in September. This action completes the reversal of the 2.2 million barrels per day of cuts that were in place since late 2023.
The report noted that OPEC members are not the only source of the new barrels. Non-OPEC producers are set to continue leading the supply growth charge, with the IEA projecting they will add 1.3 mb/d in 2025 and 1 mb/d in 2026. According to IEA, this surge is being driven by rising output from the U.S., Canada, Brazil, and Guyana, among others.
The inevitable consequence of this widening gap between supply and demand is a buildup of inventories. Global observed oil stocks have now risen for five consecutive months, reaching a 46-month high in June. The IEA warns that oil market balances are looking “ever more bloated” as the year draws to a close and supply continues to “far eclipse” demand, a looming surplus that has already impacted prices, with Brent crude futures tumbling from around $70 thousand barrels per day in July to approximately $67 thousand barrels per day in early August following the OPEC+ announcement.
The market now faces a period of heightened uncertainty. Geopolitical tensions, particularly new sanctions on Russia and Iran, could still disrupt supply and provide some support to prices. However, the IEA’s report makes it clear that without a shift in either supply or demand, the market is headed for an untenable stock build that could push prices even lower.
In conclusion, the report notes that the question on everyone’s mind is what we will “have to give” for the market to find its balance once again.