ByCharles Kennedy– Apr 15, 2025, 8:48 AM CDT
Global oil supply is set to rise by 1.2 million barrels per day (bpd) this year, lower by 260,000 bpd than the growth expected last month, the International Energy Agency (IEA) said on Tuesday, citing lower-than-forecast production from the United States and Venezuela.
The U.S.-China trade war escalation and the tariffs on imports into the U.S. have sent oil prices plummeting this month. The U.S. benchmark oil price, WTI Crude, has now slumped to levels that American producers have flagged are below their breakeven price.
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“The significant drop in oil prices rattled the US shale patch, with firms arguing they need $65/bbl on average to profitably drill new light tight oil wells, according to the latest Dallas Fed Energy Survey,” the IEA said on Tuesday in its Oil Market Report (OMR) for April.
Moreover, “New tariffs may also make it more expensive to buy steel and equipment, further discouraging drilling.”
The costs could further rise with the impact of Chinese tariffs on imports of U.S. ethane and LPG.
All these factors have prompted the Paris-based agency to revise down its U.S. oil supply forecast for this year by 150,000 bpd, with U.S. output growth now seen at 490,000 bpd.
“However, conventional oil projects remain on track, with total non-OPEC+ supply expected to rise by 1.3 mb/d” in 2025, the IEA said.
The OPEC+ group will be lifting its production targets by 411,000 bpd in May. However, the agency expects the increase “may be substantially lower given overproduction by some countries.”
Global supply growth will also be affected this year by lower output from Venezuela, with the Trump Administration’s tightening sanctions on the South American country, threatening a 25% tariff on the buyers of Venezuelan crude, and revoking the licenses of international oil firms to receive crude from Venezuela.
The IEA sees global supply growth slowing next year, from the currently expected 1.2 million bpd in 2025 to 960,000 bpd growth in 2026, when offshore projects will take the lead.
By Charles Kennedy for Oilprice.com
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