The International Energy Agency (IEA) on Thursday raised its projection for 2025 oil demand growth, driven by emerging Asia, but noted that overall demand remains soft.

The Paris-based agency said that oil markets are still dealing with a supply glut, and demand from China—which is weathering an economic downturn—"has slowed markedly."

The IEA now forecasts global demand to grow by 1.1 million barrels per day (B/D), up from last month's forecast of "just shy of" 1 million B/D next year.

It cut estimates for this year to 840,000 B/D from around 920,000 B/D previously. 

OPEC+ Members Recently Extended Output Cuts

The forecast comes a week after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced they will keep voluntary production cuts of 2.2 million B/D in place until the end of March.

Still "persistent overproduction from some OPEC+ members, robust supply growth from non-OPEC+ countries and relatively modest global oil demand growth" have led to an oil glut, the agency said. If the OPEC+ alliance unwinds the cuts starting at the end of March, world oil markets will see an increased "overhang" of 1.4 million B/D, the IEA said.

"While the market is closely assessing ongoing geopolitical tensions and evolving OPEC+ supply dynamics, the bigger question for 2025 remains global oil demand," the IEA said, noting that the "abrupt halt to Chinese oil demand growth this year," as well as "sharply lower increases" in some emerging nations, "has tilted consensus towards a softer outlook."

Brent crude futures are flat at $73.51 a barrel Thursday, while West Texas Intermediate futures are little changed at $70.28 a barrel.