US expects oil production to rise as global demand weakens

Since the week before last, when Donald Trump was elected US president, the American oil and gas industry has been riding a wave of optimism. This is reflected not only in stock markets but now also in forecasts for future production. According to the latest projections from the U.S. Energy Information Administration (EIA), US production will reach record highs. Meanwhile, the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) expect demand to weaken further, driven in particular by lower consumption in China.

The US agency expects US oil production to average 13.23 million barrels per day (bpd) by the end of 2024, around 300,000 barrels above last year’s record. The EIA had previously forecast that US oil production would settle at 13.22 million barrels per day by year-end. It also expects further growth in 2025. US oil production will rise to 13.53 million barrels per day next year, the EIA said in its November Short-Term Energy Outlook.

While optimism about production is growing in the United States, global oil demand is slowing. The International Energy Agency (IEA) expects the global oil market to move into a substantial surplus in the new year. OPEC has published similar forecasts, lowering its estimate for global demand growth in 2025 to 1.54 million barrels per day from 1.64 million barrels per day.

This means oil demand is slowing while countries outside OPEC, including Saudi Arabia, Iraq and Iran, are increasing supply. The IEA has also highlighted this trend. It forecasts that production outside OPEC will grow by 1.5 million barrels per day this year and next, with higher output in the US, Guyana, Canada and Brazil.

“Heightened concerns about the security of oil supplies are playing out against the backdrop of a global market that—as we have been emphasising for some time—looks well supplied,” the IEA said. This situation suggests that countries are seeking to diversify their oil supplies out of concern over geopolitical risks.

China and OPEC add to uncertainty in forecasts

Oil demand growth has been a source of major disagreement among leading oil forecasters, primarily because of differences in estimates of Chinese consumption. China has long driven the global increase in oil consumption.

However, according to IEA forecasts, slower economic growth in China and the shift to electric vehicles have changed the paradigm for the world’s second-largest economy.

“Oil demand in China continues to fall short of expectations and is the main drag on overall growth,” the IEA said.

In line with these trends, the agency now expects Chinese demand to grow by 150,000 barrels per day in 2024, 30,000 barrels less than in its previous forecast. Consumption fell by 500,000 barrels per day in August compared with the same month last year, marking the fourth consecutive month of decline.

OPEC has also lowered its forecast for global demand growth, but still expects a stronger expansion of 1.93 million bpd, partly due to a larger contribution from China. The difference between the IEA and OPEC forecasts amounts to more than 1% of global demand.

The behaviour of OPEC countries and other partners, such as Russia and Kazakhstan, is another factor adding uncertainty to the global market. Since the end of 2022, the organization has introduced a series of production cuts, most of which are set to remain in place until the end of 2025. The move was intended to support prices.

The group of countries had been due to start unwinding the final layer of cuts, amounting to 2.2 million barrels per day, in a coordinated move from December. However, at the beginning of November it said it would delay the plan by a month, as weak demand and rising supply from outside the group continue to weigh on the market.