The global oil market is bracing for a volatile period as trade tensions escalate and supply shifts influence pricing and demand forecasts.
According to the latest Oil Market Report (OMR) from the International Energy Agency (IEA), economic uncertainties and policy decisions are reshaping the trajectory of oil demand and production, leading to downward revisions in growth forecasts and price fluctuations.
“Escalating trade tensions have negatively impacted the economic outlook.
“The downgrade comes on the heels of robust oil consumption in 1Q25, up by 1.2 million barrels per day (mb/d) year-on-year – its strongest rate since 2023.”
The IEA Oil Market Report (OMR)
However, the agency warned that this momentum is unlikely to be sustained through the rest of the year, with demand further slowing in 2026 to 690 kb/d, as global economic uncertainty persists and electric vehicle (EV) adoption continues to erode fossil fuel growth.
The IEA highlighted that benchmark Brent crude futures plummeted by more than $15 per barrel in early April to below $60/bbl, marking the lowest price in more than four years.
Although prices have since rebounded to around $65/bbl, volatility remains high amid trade tariff announcements, OPEC+ production shifts, and fears of a global economic slowdown.
“After a period of relative calm, global oil markets were roiled by a barrage of trade tariff announcements.
“The prospect of higher supplies from some OPEC+ countries and inflationary concerns further weighed on oil prices.”
The IEA Oil Market Report (OMR)
While imports of oil, gas, and refined products were exempted from the new U.S. tariffs, investor sentiment soured, with markets pricing in increased inflationary risks, slower global growth, and potential trade retaliations, especially between the U.S. and China.
Mixed Signals from OPEC+ and Non-OPEC+
Despite the downbeat demand forecast, world oil supply rose by 590 kb/d to 103.6 mb/d in March, up 910 kb/d year-on-year, with non-OPEC+ producers leading the gains.
Nevertheless, the IEA cut its 2025 supply growth forecast by 260 kb/d to 1.2 mb/d, citing output slowdowns in the U.S. and Venezuela.
“The significant drop in oil prices rattled the US shale patch. Firms argue they need $65/bbl on average to profitably drill new light tight oil wells.”
The IEA Oil Market Report (OMR)
According to the latest Dallas Fed Energy Survey, lower prices, coupled with tariff-induced increases in equipment and steel costs, are curbing investment appetite in the U.S. shale sector.
As a result, the IEA revised down its U.S. supply forecast by 150 kb/d, with growth now estimated at 490 kb/d in 2025.
Meanwhile, OPEC+ plans to raise its output targets by 411 kb/d in May, but the IEA cautioned that actual increases may be smaller.
Several countries, including Kazakhstan, Iraq, and the UAE, are already overproducing, and some have pledged to compensate for earlier excesses, potentially offsetting planned hikes.
“Kazakh crude output hit a record 1.8 mb/d following the Tengiz field expansion, putting it 390 kb/d above its OPEC+ quota.”
The IEA Oil Market Report (OMR)
Looking ahead to 2026, global supply is expected to rise by 960 kb/d, led by offshore developments in Brazil (+240 kb/d), Guyana (+160 kb/d), and Canada (+120 kb/d), while U.S. supply growth slows to just 280 kb/d.
The IEA also reported that global refining throughputs are forecast to average 83.2 mb/d in 2025, with a modest annual growth of 340 kb/d — a 230 kb/d downward revision compared to last month’s forecast. In 2026, throughputs are projected to increase by 360 kb/d.
Refining margins were mixed in March, with Atlantic Basin refiners suffering from weak middle distillate cracks, while Singapore margins gained on sour crude processing advantages.
On inventories, global observed oil stocks rose by 21.9 million barrels (mb) in February to 7,647 mb, though they remained near the bottom of the five-year range.
Crude, natural gas liquids (NGLs), and feedstocks surged by 41.2 mb, while oil product inventories fell by 19.2 mb, driven by a 34.2 mb drop in OECD onshore stocks.
“With arduous trade negotiations expected to take place during the coming 90-day reprieve on tariffs and possibly beyond, oil markets are in for a bumpy ride.”
The IEA Oil Market Report (OMR)
While 2026 oil demand growth is projected to slow to 690 kb/d, supply growth outside OPEC+ remains robust, with Brazil, Guyana, and Canada expected to lead production gains.
The outlook suggested that non-OPEC+ supply growth of 920 kb/d will comfortably outpace global demand, even with U.S. supply expansion slowing to 280 kb/d.
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