(Yicai) Nov. 14 -- There could be an oversupply of oil of 1.15 million barrels per day next year, as demand slumps amid a shift to renewable energy sources and a global economic slowdown, the International Energy Agency said in its November oil market report released yesterday.

This is the biggest supply gut predicted by the IEA since April when it first warned that supply would outstrip demand in 2025, and it is 40,000 barrels more than its forecast last month.

Oil demand will grow by less than one million barrels a day this year and next, the IEA said. This is well under the growth of two million barrels a day last year. The average annual growth in the 20 years from 2000 to 2019 was 1.2 million barrels per day.

The slowdown in global economic development since the pandemic and the substitution of fossil fuels with clean energy are the main reasons for the stalling oil demand, the Paris-based agency said.

But at the same time, oil supply is expected to keep growing. The US, which is the biggest producer in the Americas, is likely to add 1.5 million barrels of oil a day this year and next year, the IEA said. This is much higher than the amount by which demand is expected to expand over the period.

Donald Trump’s return to power in the US may mean a more relaxed fossil energy policy which will speed up the approval of US oil and gas projects and increase local oil production, analysts said. This will lead to greater oil output and lower international oil prices. Since Trump won the election, WTI’s and Brent’s crude oil futures prices have slumped 5 percent.

If the OPEC+ countries push forward with their plan to hike output, in other words if they lift their current reduction of 2.2 million barrels a day next year, this will create an even bigger oil glut, the IEA said.

Weak demand from the world’s major economies has meant that OPEC has lowered its forecast for growth in global oil demand this year and next for four consecutive months.

In its November report, OPEC reduced its growth forecast for this year which it made in October by 107,000 barrels to 1.82 million barrels a day, and for next year by 103,000 barrels to 1.54 million barrels a day.

Since the release of its first oil forecast report in July 2023, OPEC held strong bullish expectations for global oil demand, but it has been lowering this forecast since August.

Editor: Kim Taylor