According to the latest Oil Market Report from the International Energy Agency (IEA), global oil demand growth is expected to decelerate significantly, dropping from 990,000 barrels per day (kb/d) in the first quarter of 2025 to 650 kb/d for the remainder of the year.
This slowdown is attributed to economic challenges and record electric vehicle (EV) sales, which are curbing oil consumption.
The IEA report has projected an average demand growth of 740 kb/d in 2025 and 760 kb/d in 2026, despite accelerating declines in OECD countries of -120 kb/d and -240 kb/d, respectively.
On the supply side, world oil production is on track to increase by 1.6 million barrels per day (mb/d), reaching an average of 104.6 mb/d in 2025, with an additional rise of 970 kb/d in 2026.
Non-OPEC+ producers are expected to contribute 1.3 mb/d this year and 820 kb/d next year, even as US light tight oil (LTO) supply faces reductions. OPEC+ plans to add 310 kb/d of supply this year and 150 kb/d in 2026.
Refinery throughput forecasts remain stable from the previous month’s report, estimated at 83.2 mb/d for 2025 and 83.6 mb/d for 2026.
Annual gains of around 400 kb/d in both years will be driven exclusively by non-OECD regions.
Refining margins reached their highest levels in 12 months by late April, as a notable shift in crude pricing enhanced profitability.
In March, global oil stocks increased by 25.1 mb, primarily due to a 57.8 mb rise in crude stocks.
Despite this increase, total inventories at 7,671 mb remain well below the five-year average, which is down by 221 mb. Preliminary data indicates that global oil inventories continued to build in April.
Benchmark crude oil prices have dropped by approximately $10 per barrel in April and May, influenced by escalating US tariffs and larger-than-expected output increases from OPEC+.
However, market sentiment improved slightly after the US reached a trade agreement with the UK on May 8 and a 90-day accord with China on May 12.
As of now, North Sea Dated crude is trading around $66 per barrel.
The IEA highlights emerging signs of a slowdown in global oil demand growth, particularly in non-OECD countries such as China and India, which have shown weaker-than-expected delivery data.
The anticipated growth for the remainder of 2025 is now projected at a more modest 650 kb/d, leading to an average annual increase of 740 kb/d, followed by 760 kb/d in 2026.
Emerging economies continue to drive growth, contributing 860 kb/d this year and 1 mb/d next year, while OECD countries face accelerating declines.
In early May, OPEC+ surprised the market by announcing a second consecutive monthly increase in production of 411 kb/d for June, effectively advancing the bloc’s output to levels initially scheduled for October 2025.
However, actual gains may be lower due to several countries, including Kazakhstan, the UAE, Iraq, and Russia, producing above their targets, while others face capacity constraints.
The recent slump in oil prices is also expected to impact US shale production, with independent producers indicating plans to reduce rig counts and cut capital expenditure guidance by up to 9% for 2025.
Consequently, forecasts for US light tight oil production have been lowered by 40 kb/d for 2025 and 190 kb/d for 2026. Total US supply growth is now assessed at 440 kb/d and 180 kb/d, respectively, reaching 20.9 mb/d by 2026.
With global supply rises expected to significantly outpace demand growth, oil inventories are forecast to increase by an average of 720 kb/d this year and 930 kb/d next year, contrasting with a decline of 140 kb/d in 2024.
According to IEA, this trend sets the stage for a rebalancing of supply and demand fundamentals in the oil market.
