The International Energy Agency (IEA) has warned of a potential tipping point in the global oil market, following signs that a glut in supply is becoming increasingly evident.
The IEA’s head of the Oil Industry and Markets Division, Toril Bosoni, wrote her reasoning on a commentary on the IEA website. She pointed out that from January through September this year, an average of 1.9 million barrels per day (bpd) more than was needed has been delivered to the global markets.
The price of crude oil has remained quite resilient, however. She said this was because the inventory had accumulated in locations where it tends to have a weaker effect on prices, such as US gas liquids and Chinese crude stocks. She added that the world’s oil inventories now were at:
“…a four-year high of 7.9 billion barrels. More than one-third of the increase occurred in Chinese crude stocks, which now sit 30% above their 2019 level. China’s substantial stockpiling this year has been underpinned by a new Energy Law, enacted on 1 January 2025, aimed at improving its energy security.”
The flow of oil is set to increase further due to increased production from the Middle East and the Americas, such as the Guyana projects of ExxonMobil, the maker of Mobil DTE hydraulic oil. With the surplus set to reach 4 million bpd next year, she said it was increasingly clear that something would have to give. A drop in oil prices will likely lead to operators with higher break-even costs cutting their production.
