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Daily Economic Update
15.10.2025
Oil: IEA sees bigger supply glut in 2026 amid subdued oil demand and higher supply. The International Energy Agency (IEA), in its monthly oil market report, pared back its oil demand growth estimate for 2025 slightly to 710 kb/d (-30 kb/d) – a decline of 270 kb/d from 2024’s level – and sees a similar rate of growth for 2026 amid weaker macroeconomic conditions and rising transport sector electrification. The more eye-catching adjustment, however, is the upward revision to its oil supply growth estimate this year to 3 mb/d (+300 kb/d) and to 2.4 mb/d in 2026, amid robust production growth in both OPEC+ and non-OPEC+ countries. Indeed, stronger output growth in the US, Brazil, Canada, Guyana, and Argentina this year prompted the agency to raise its non-OPEC+ supply growth estimates to 1.6 mb/d, an increase of 200 kb/d compared to September’s forecast. Meanwhile, the easing of output restrictions among OPEC+ members and solid growth in Venezuelan production lifted the 2025 estimate to 1.4 mb/d, offsetting near term declines in Russian and Iranian production. The IEA’s demand and supply projections imply a record 4 mb/d surplus next year – a pandemic-era size overhang – with signs of stockpiling already emerging. According to the agency, global inventories rose by 17.7 mb in August to a four-year high, while preliminary data for September indicate a 102 mb build in oil at sea. The substantial output increases from OPEC+ this year, followed by OPEC-8’s decision to slow the pace of production growth (during this second tranche of supply cut unwinding) and refrain from offering forward guidance, point to caution on the capacity of the market to absorb such a large supply increase, likely pushing prices lower in the near term. However, as lower oil prices weigh on US shale output and stimulate demand through lower oil prices at the pump, it is doubtful that the surplus in 2026 will be as large as 4 mb/d.
US: Powell reiterates downside risks to employment and sounds dovish, signaling more rate cuts ahead. Fed Chair Powell, in a speech yesterday, left the door open for further interest rate cuts as he cited “pretty significant downside risks” to employment though inflation continued to be above target amid tariff risks. He underlined little change in employment and inflation outlooks since the FOMC September meeting, apparently signaling that the latest FOMC projections for interest rate cuts remain valid. Powell highlighted that both labor demand as well as supply given immigration curbs have collapsed quickly, with breakeven job growth coming “way down,” and higher unemployment risks amid low levels of job creation. He also signaled to scale back or stop the Fed’s balance sheet run off, seeing some tightening in money markets though emphasized that banking system reserves were still abundant as of now. He lamented the lack of economic data releases due to an ongoing government shutdown, stressing alternative data is no replacement to “gold standard” official data. Overall, despite Powell largely repeating his stance of “no risk-free path for policy,” there was some dovish leaning in his thinking as he seemed to tilt towards focusing more on the Fed’s job mandate ahead of the FOMC October 28-29 meeting. For now, futures markets continue to signal two more rate cuts by the end of the year. Meanwhile, there appeared to be no off-ramp in current trade hostilities between the US and China with both sides looking to escalate matters ahead of an expected Trump-XI meeting in South Korea during the October 31-November 1 Asia-Pacific Economic Cooperation summit.
Global: IMF upgrades 2025 global growth for the second time, but 2025-2026 growth remains on a downtrend. In its World Economic Outlook report published yesterday, the IMF raised its global growth forecast to 3.2% from 3% for 2025 and kept 2026 growth unchanged at 3.1%. This is the second upgrade to 2025 growth, after that had been revised up to 3% from 2.8% in July. Still, growth is seen on a downtrend across 2025 and 2026, following 3.3% in 2024, and medium-term growth prospects are dim due to greater protectionism and fragmentation. For 2025, and after a resilient start, “the global economy is showing signs of a moderate slowdown”. Among the major economies, growth in the US was raised by 0.1 percentage points in 2025 and 2026, to 2% and 2.1%, respectively, while Eurozone growth was upgraded by 0.2 and lowered by 0.1 percentage points in 2025 and 2026, respectively, to 1.2% and 1.1%. Growth in the UK was slightly increased this year and moderately decreased in 2026, standing at 1.3% in both years. Japan got the largest upgrade of 0.4 percentage points this year, to 1.1%, and slightly higher to 0.6% in 2026. China’s growth was left unchanged at 4.8% and 4.2% in 2025 and 2026, respectively. Risks to the global growth outlook remain tilted to the downside. The IMF mentioned that “rebuilding fiscal buffers and safeguarding debt sustainability remain a priority” and that the “pass-through of tariffs to US consumer prices, previously muted, appears increasingly likely”.
China: September CPI falls 0.3% y/y as deflation persists despite policy efforts. Consumer price inflation fell 0.3% y/y in September, steeper than estimates of a 0.1% decline but slightly less than a 0.4% fall in August. The decline in the headline rate was driven by steeper declines in food prices (-4.4% y/y vs -4.3% in August), recording the strongest contraction since January 2024. Meanwhile, the core rate, excluding food and energy, rose to 1.0% y/y its highest level since February 2024. On the industrial side, the producer price index fell 2.3% from a year earlier, narrowing from a 2.9% fall in August. The recent data reinforces the need for additional policy support, as prolonged weakness in the property sector and ongoing trade tensions continue to undermine business and consumer confidence. These persistent headwinds are weighing on sentiment and suggest that without further intervention, China’s growth picture may remain fragile and uneven.
Saudi Arabia: GDP growth revised up by the IMF. The IMF raised Saudi Arabia’s 2025 GDP growth forecast to 4%, up from its earlier estimate of 3%, primarily due to a quicker-than-expected increase in oil output. This revision reflects stronger momentum in both oil and non-oil sectors. The non-oil economy, a key pillar of the Kingdom’s Vision 2030 diversification strategy, continues to expand, supported by investments in tourism, manufacturing, and technology. In our view, Saudi Arabia’s non-oil sector is expected to remain robust after growing by 4.8% in the first half of 2025 and contributing over 55% to total GDP, pushing up overall GDP growth to 3.6% in H1. Despite fiscal challenges from lower oil prices and production cuts, the IMF’s outlook signals confidence in Saudi Arabia’s economic resilience over the medium term, with 4% growth also projected for 2026.
Egypt: IMF upgrades Egypt’s growth outlook. The IMF also raised its forecast for Egypt’s economic growth in FY25/26, to 4.5% up from 4.1% in its previous estimate. The upward revision comes after the Egyptian economy outperformed its target in the previous fiscal year, recording a 4.4% growth rate, exceeding the expected 4.2%. The IMF also revised down its unemployment forecast to 7.3% in FY25/26, compared to 7.7% in April’s projection. In addition, the Fund significantly improved its inflation outlook, expecting inflation to ease to 11.8% in FY25/26, down from 20.4% in FY24/25, reflecting progress in macroeconomic stabilization efforts.