OPEC and its allies, known as OPEC+, are confronting a challenging environment as the risk of a crude oil supply surplus in 2025 combined with slowing global demand poses difficulties for their production plans. Despite efforts to increase output, the group is now facing headwinds that may limit the impact of supply disruptions on oil prices, according to Bank of America (BofA) strategists in a recent report.
Key Points:
- Slowing Demand Growth: OPEC+ had previously aimed to boost output to regain market share, but the global demand growth has sharply slowed. The forecasted growth has dropped from 1.9 million barrels per day (b/d) in 2023 to just 900,000 b/d in Q1 2024, with even slower growth of less than 700,000 b/d in Q2 and Q3 2024.
- Non-OPEC Production Surge: Rising production outside of OPEC, driven by higher oil prices and increased drilling activity, is adding more barrels to the market. BofA anticipates that non-OPEC supply will grow by 1.4 million b/d in 2025 and another 900,000 b/d in 2026. This includes notable increases from countries like Brazil, Guyana, Canada, and Norway, along with a significant rise in U.S. supply, especially from the Gulf of Mexico.
- Global Oil Surplus Expected in 2025: With these production increases, the global oil market is projected to experience a surplus of 730,000 b/d in 2025. This leaves OPEC+ with limited options to manage market balances effectively, as their ability to influence prices diminishes amidst rising non-OPEC output.
