Oil markets face supply glut amid weak demand

The global oil market is bracing for what the International Energy Agency (IEA) warns could be the biggest supply glut since the pandemic, with crude inventories projected to swell through late 2025 and early 2026.

- Issac John

On Thursday, Brent crude futures were close to a two-week high and up 43 cents, or around 0.6 per cent, at $67.27 a barrel at 1203 GMT. US West Texas Intermediate (WTI) crude futures were up 45 cents, or 0.7 per cent, at $63.16 a barrel. Both contracts climbed over 1 per cent in the prior session.

The draw signals resilient demand, yet gains remain limited as geopolitical tensions cloud the outlook.

Energy traders weigh the prospect of shifting global supply flows, including stronger Russian exports and higher Opec+ output, which have pressured crude to a three-month low, down over 10 per cent this month.

Demand growth continues to underperform expectations, while production — both from Opec+ and non-Opec+ suppliers — is surging to multiyear highs.

In its August oil market report, the IEA once again cut demand growth forecasts, marking the sixth downgrade this year. Global oil demand is now expected to rise by just 680,000 barrels per day (bpd) in 2025 and by 700,000 bpd in 2026. Since the start of the year, the agency has lowered its growth outlook by a combined 350,000 bpd. Weak consumption across major economies and softer-than-expected demand from emerging markets such as China, Brazil, Egypt and India underpin the downward revisions. While jet fuel demand is enjoying a summer boost of over 2 per cent in the US and Europe, it has not been sufficient to offset wider demand weakness.