Growth slumps to 650 kb/d for remainder of 2025; record EV sales, OECD contraction drive down demand

The global oil market may be heading into oversupply territory as demand growth weakens and producers ramp up output, according to the International Energy Agency’s (IEA) latest May Oil Market Report.

The agency forecasts that global oil demand will slow sharply to 650,000 barrels per day (kb/d) for the rest of 2025, down from 990 kb/d in Q1, due to economic headwinds and record electric vehicle sales. On average, demand is now set to grow by just 740 kb/d in 2025, and a modest 760 kb/d in 2026 — a notable cooling after years of post-pandemic recovery.

The slowdown is most pronounced in OECD economies, where oil use is expected to decline by 120 kb/d in 2025 and a steeper 240 kb/d in 2026. In contrast, non-OECD countries will contribute 860 kb/d of demand growth this year and 1 million barrels per day (mb/d) next year, underpinned by expanding industrial and transport sectors in emerging economies.

Supply growth outpaces demand

While consumption softens, global oil supply is poised to grow by 1.6 mb/d in 2025, reaching an average of 104.6 mb/d, and a further 970 kb/d in 2026. The bulk of this rise comes from non-OPEC+ producers, led by Brazil, Guyana, and new projects in the North Sea, which will add 1.3 mb/d this year and 820 kb/d next year.

The IEA also noted a surprise pivot by OPEC, which has begun unwinding production cuts. Following two consecutive monthly quota hikes, the group is projected to add a net 310 kb/d to global supply in 2025 and 150 kb/d in 2026. However, the report cautions that some members face capacity constraints or need to offset previous overproduction. “A further tightening of sanctions enforcement on Venezuela, Iran, and Russia may yet offset some of those increases,” it said.

Global refinery throughput is forecast at 83.2 mb/d in 2025 and 83.6 mb/d in 2026, holding steady. However, refining margins spiked to 12-month highs in April, driven by a sudden narrowing of heavy-light crude differentials, with Asia and the Middle East benefiting the most. European refiners, meanwhile, continue to be weighed down by weak demand and carbon compliance costs.

Oil inventories rose by 25.1 million barrels in March, with crude stocks alone up 57.8 million barrels, the IEA reported. Total on-land and floating storage hit 7.67 billion barrels, still 221 million below the five-year average, but rapidly catching up. Early April data suggest another build, with average stock increases projected at 720 kb/d in 2025 and 930 kb/d in 2026.

Analysts are beginning to warn of a price overhang. “Inventories could breach the five-year average by autumn in the northern hemisphere,” the report noted, which could revive expectations of a price floor in the mid-US $50s — unless OPEC+ intervenes or demand rebounds unexpectedly.

In a sign of moderation, the IEA cut its forecast for US light-tight oil (LTO) growth by 40 kb/d in 2025 and 190 kb/d in 2026, reducing total US supply additions to 440 kb/d this year and just 180 kb/d next year.

The report underscores a structural shift: while emerging markets and cleaner transport alternatives grow, oil’s dominance may be plateauing. The twin engines of slowing demand and strong supply could create persistent downward pressure unless producers recalibrate or consumption surprises on the upside.