The International Energy Agency (IEA) finds in its latest Oil Market Report that global oil demand growth is slowing amid economic headwinds and rising electric vehicle adoption, while supply increases and inventory builds are reshaping the oil market outlook for 2025 and 2026.

According to IEA, with the rises in global supply expected to considerably outpace demand growth, oil inventories are forecast to jump by an average of 720 kb/d this year and 930 kb/d next year, compared with a decline of 140 kb/d in 2024. This, IEA notes, sets the stage for a further rebalancing of supply and demand fundamentals.

Oil prices resumed their downward trajectory in late April and early May as trade tensions impacted financial and commodity markets and OPEC+ agreed to a further unwinding of production cuts. Bearish sentiment subsequently eased somewhat after the United States reached a trade deal with the United Kingdom on 8 May, and a 90-day accord with China on 12 May. 

Nonetheless, increased trade uncertainty is expected to weigh on the world economy and, by extension, oil demand. Brent crude oil futures slumped by $14/bbl in April to a four-year low of just above $60/bbl by early May, before rebounding to around $66/bbl at the time of writing.

Signs of a slowdown in global oil demand growth may already be emerging and will be tracked closely. Following a relatively robust 1Q25, latest non-OECD delivery data, especially for China and India, have been weaker than expected. We now see growth at a more subdued rate of 650 kb/d for the remainder of 2025, resulting in an average annual increase of 740 kb/d – followed by a rise of 760 kb/d in 2026. 

Despite the recent soft patch, emerging economies remain the main driver of growth, adding 860 kb/d this year and 1 mb/d next year – in contrast to an accelerating decline in OECD countries of -120 kb/d and -240 kb/d, respectively.

(Safety4Sea)