The International Energy Agency slashed forecasts for global oil demand this year amid the brewing trade war, and in its first detailed assessment of 2026 predicted a persistent supply surplus.
The adviser to major economies chopped projections for 2025 demand growth by a hefty 300,000 barrels a day — or almost a third — to 730,000 barrels a day, according to a monthly report on Tuesday. Half of the reduction was concentrated in the US and China, which are engaged in a full-blown trade war.
Consumption growth will be even slower in 2026, at 690,000 barrels a day, due to “a fragile macroeconomic environment” and the rising popularity of electric vehicles, the Paris-based agency said.
“The deteriorating outlook for the global economy amid the sudden sharp escalation in trade tensions in early April has prompted a downgrade to our forecast,” IEA analysts wrote.
The downgrade follow a slump in oil prices to a four-year low below $60 a barrel in London last week, after US President Donald Trump announced a slew of punitive trade tariffs. Brent futures have since recovered a little, trading near $65 on Tuesday.
Trump’s move, coupled with a surprise decision by OPEC+ producers to accelerate production increases next month, spurred a series of oil-price revisions from Wall Street giants including Goldman Sachs Group Inc. and JPMorgan Chase & Co.
As the market slump takes a toll on US drillers, the IEA also lowered estimates for new supplies outside the Organization of the Petroleum Exporting Countries this year by 200,000 barrels a day to 1.3 million barrels a day.
These supply additions will still be more than enough to satisfy the subdued rate of demand, both this year and next. In 2026, production outside OPEC+ will expand by a “robust” 920,000 barrels a day, with growth still dominated by the US, Brazil, Canada and Guyana. The global overhang will balloon to 1.7 million barrels a day during the first quarter of next year, according to the agency’s data.
Amid the gloom, the report showed some lingering signs of strength in the oil market. Demand growth during the first quarter was at its strongest since 2023, and world oil inventories are hovering “near the bottom of the five-year range.”
Yet the overall outlook is bearish. Even OPEC’s secretariat — typically more bullish than other forecasters — has acknowledged the deteriorating picture, trimming oil demand projections in its latest monthly report on Monday. Its estimates remain considerably higher than the IEA’s and Wall Street’s.
OPEC leader Saudi Arabia has surprisingly appeared to encourage the market downturn, steering the group to bolster output by three times the scheduled amount in May in a bid to compel fellow members to abide by their output limits. It may be a strategy only for the short term.
For the IEA, the slowdown in growth from the recent average of around 1 million barrels a day fits with its broader outlook that oil consumption will stop growing this decade as the transition from fossil fuels to renewable energy gathers momentum.
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