The International Energy Agency (IEA) has forecasted a significant slowdown in global oil demand growth for 2025, anticipating the weakest annual increase in more than a decade—excluding the pandemic period of 2020. The agency now expects demand to rise by just 700,000 barrels per day (b/d) this year, a downward revision from its previous estimate of 720,000 b/d.
According to the IEA’s latest Monthly Oil Market Report, the current forecast marks the lowest annual increase in demand since the 2009 financial crisis. The only exception was during the COVID-19 pandemic, when oil demand sharply contracted by 8.7 million b/d due to widespread economic shutdowns.
Factors Behind the Slowdown
The IEA attributed the revised outlook to weaker-than-expected consumption in the second quarter of 2025, especially in several emerging markets. Although part of the decline was weather-related, the agency noted increasing signs of pressure from economic uncertainty, particularly stemming from new U.S. tariffs introduced by President Donald Trump.
Countries directly impacted by these tariffs experienced the sharpest quarterly declines in oil demand:
- China: -160,000 b/d
- Japan: -80,000 b/d
- South Korea: -70,000 b/d
- Mexico: -40,000 b/d
- United States: -60,000 b/d
In contrast, demand in Europe and non-Asian emerging markets remained more stable.
Disagreement with Opec+
The IEA’s forecast diverges significantly from that of the Opec+ oil cartel, which maintains that demand will grow by 1.3 million b/d in 2025. This difference continues the ongoing tension between the two bodies, with Opec officials in recent years accusing the IEA of political bias.
Opec+ members began unwinding prior production cuts in April, citing confidence in the strength of global demand. However, the IEA now expects global oil supply to grow faster than demand, potentially dragging prices lower in the second half of the year.
Supply Outlook and Price Implications
The report noted that oil production in June was 2.9 million b/d higher compared to a year earlier, with 1.9 million b/d of that increase coming from Opec+ countries. Total global oil supply is projected to reach 105.1 million b/d this year, while demand is forecast at 103.7 million b/d, resulting in a surplus.
Analysts believe the growing surplus could push Brent crude prices down, potentially falling below $60 per barrel in the final quarter. On Friday morning, Brent crude was trading at $68.80 per barrel, a slight increase of 0.2%.
The evolving global energy landscape, shaped by geopolitics, climate conditions, and shifting economic policies, continues to present challenges for forecasters and market participants alike.
