Onome Amuge
Global oil demand growth is set to decelerate sharply for the remainder of 2025, according to the International Energy Agency (IEA), as economic headwinds intensify and the electric vehicle (EV) market continues its record-breaking expansion. The Paris-based energy watchdog now projects demand growth to moderate to 650,000 barrels per day (bpd) for the rest of the year, a dip from the 990,000 bpd recorded in the first quarter (January-March).
In its closely watched May oil market report, the IEA cited increasing global trade uncertainty as a key factor weighing on economic activity and, consequently, oil consumption.
“Increased trade uncertainty is expected to weigh on the world economy and, by extension, oil demand,” the agency stated.
Despite the anticipated slowdown in the latter part of the year, the IEA has revised its overall global demand growth forecast for 2025 upwards by 20,000 bpd to an average of 740,000 bpd. This upward adjustment reflects stronger-than-initially-expected economic growth in the early months and the supportive impact of lower oil prices on consumption. The IEA anticipates a similar level of demand growth in 2026, averaging 760,000 bpd.
On the supply side, the IEA increased its growth forecast by nearly 400,000 bpd to 1.6 million bpd for 2025. This upward revision is largely attributed to expectations of higher output from Saudi Arabia, which offsets the anticipated deceleration in US shale oil production in the context of a lower oil price environment.
The IEA highlighted Saudi Arabia’s pivotal role in the revised supply outlook, noting that the Kingdom possesses the most significant spare capacity to inject additional barrels into the market at current production levels. This comes as the OPEC+ group, at its recent meeting, agreed to a second consecutive monthly acceleration of output increases for June.
However, the IEA anticipates that sustained price weakness will trigger more production cuts in the US shale sector in the coming quarters.
Consequently, the agency has lowered its US shale output forecast by 40,000 bpd for 2025 and a more substantial 190,000 bpd for 2026.
“Based on continued price weakness, we expect more activity cuts over the coming quarters,” the IEA cautioned regarding US shale production.
Interestingly, the Organization of Petroleum Exporting Countries (OPEC), in its own monthly oil market report released on Wednesday, presented a slightly different perspective on non-OPEC+ supply. The producer group trimmed its forecast for oil supply growth from the US and other producers outside the wider OPEC+ alliance for 2025.
The IEA’s analysis points towards a significant imbalance between supply and demand, projecting a sharp rise in global oil inventories. The agency forecasts that supply will considerably outpace demand growth, leading to an average build-up in oil storage levels of 720,000 bpd this year. This contrasts sharply with the average stock draw of 140,000 bpd observed in the previous year.
