Global oil markets appear set for a gear-shift as the twin engines of demand weaken just as supply races ahead. The International Energy Agency’s (IEA) May Oil Market Report foresees world oil demand growth sliding from a brisk 990 thousand barrels per day (kb / d) in the first quarter of 2025 to only 650 kb / d for the rest of the year, throttled by flagging economic activity and record electric-vehicle sales.
On average, demand is now expected to expand by 740 kb / d in 2025 and a modest 760 kb / d in 2026, despite ever-steeper declines in Organisation for Economic Co-operation and Development (OECD) countries of 120 kb / d next year and 240 kb / d the year after.
Emerging economies and other non-OECD consumers will together account for 860 kb / d of additional demand this year and 1 million barrels (mb/d) a day in 2026.
While demand taps the brakes, producers are pressing hard on the accelerator. World oil supply is on course to rise by 1.6 mb / d in 2025, averaging 104.6 mb / d, and by a further 970 kb / d in 2026. Non-OPEC+ countries will deliver the bulk of the increase — 1.3 mb / d this year and 820 kb / d next — thanks to large conventional projects coming on line in Brazil, Guyana and the North Sea.
OPEC+, meanwhile, has surprised the market by fast-tracking the unwinding of its production curbs. After two successive monthly quota rises, the group is poised to add a net 310 kb / d to global supply in 2025 and another 150 kb / d in 2026. Not every member can meet its higher target — some face capacity constraints while others must compensate for past over-production, the report noted. "A further tightening of sanctions enforcement on Venezuela, Iran and Russia may yet offset some of those increases.”
Refinery throughput forecasts are steady at 83.2 mb / d for 2025 and 83.6 mb / d for 2026, but margins hit 12-month highs in late April as a sudden narrowing of heavy-light crude price differentials fattened profits, particularly in Asia and the Middle East. All of the incremental runs originate outside the OECD; European refiners continue to struggle with weak domestic demand and costly carbon compliance.
Global oil inventories rose by 25.1 million barrels in March, led by a hefty 57.8 million-barrel build in crude. On-land and floating storage combined reached 7.67 billion barrels — still 221 million shy of the five-year norm, but moving rapidly in that direction. Preliminary April data point to another increase, and the IEA projects average stock builds of 720 kb / d this year and 930 kb / d in 2026.
Those ballooning barrels are already weighing on sentiment. Analysts warn that inventories could breach the five-year average by the northern-hemisphere autumn, resurrecting talk of a price floor in the mid-US $50s unless OPEC+ reverses course or demand surprises on the upside.
IEA has pared its light-tight oil (LTO) growth forecast by 40 kb / d this year and 190 kb / d next, trimming total US supply additions to 440 kb / d and 180 kb / d respectively.
IEA’s modest demand forecasts look increasingly fragile. A sharper global downturn, steeper adoption of electric vehicles — sales are already running at 18 million units a year — and tougher efficiency standards could knife another few hundred thousand barrels a day off growth. Conversely, an early recovery in manufacturing or a geopolitical shock in the West Asia could squeeze balances.