Global oil demand is showing clear signs of deceleration, according to the International Energy Agency’s (IEA) latest Oil Market Report, as economic pressures and increased electric vehicle adoption reshape the energy landscape. While demand growth is tapering, rising supply and expanding inventories are expected to dominate the market outlook through 2025 and 2026.
The IEA forecasts oil inventories will increase by an average of 720,000 barrels per day (kb/d) in 2025 and 930 kb/d in 2026, a sharp turnaround from a decline of 140 kb/d recorded in 2024. This reflects a significant imbalance between supply growth and weakening demand, setting the stage for an ongoing rebalancing of market fundamentals.
Oil prices fell sharply in April, with Brent crude slumping by $14 per barrel to just over $60 — a four-year low — before recovering to approximately $66 by mid-May. This volatility followed rising trade tensions and OPEC+’s decision to further ease production cuts. Some stability returned after the U.S. reached trade agreements with the U.K. on May 8 and China on May 12.
Nonetheless, trade uncertainty continues to cloud global economic prospects and, by extension, oil demand. While the first quarter of 2025 showed relative strength, recent data from non-OECD nations, particularly China and India, suggest weakening momentum. The IEA now expects oil demand to grow by just 650 kb/d over the remainder of the year, averaging 740 kb/d for all of 2025 and 760 kb/d in 2026.
Emerging markets remain the key drivers of growth, projected to contribute 860 kb/d this year and 1 million barrels per day in 2026. In contrast, OECD countries are expected to see continued declines in demand, with drops of 120 kb/d in 2025 and 240 kb/d in 2026.