Oil demand growth has been disappointing for two years. In the spring of 2025, the outlook deteriorated further. In its May Short-Term Energy Outlook, the US Energy Information Administration forecast that world consumption of crude oil and other liquid fuels would grow by less than 1 million barrels a day in both 2025 and 2026. Coming after a similarly weak 2024, that would mean three consecutive years below the 1 million barrel mark. In the two decades before the pandemic, world oil consumption grew by an average of 1.3 million barrels a day.
The reason is macroeconomic. The EIA now expects world GDP to grow 2.8 per cent in both 2025 and 2026. Excluding the contractions of 2009 and 2020, those would be the slowest growth rates since 2008. The agency observes that since 2000, annual oil consumption growth has been weakest in years when the world economy grew by less than 3 per cent.
The tariff channel
The trigger for the downgrade is trade policy. The EIA says that tariffs announced on US trading partners in early April may already have slowed global trade in physical goods, citing preliminary container vessel departure data from Bloomberg. The mechanism is direct. Less trade means fewer goods moving by ship and truck, which means less bunker fuel and diesel. Weaker trade also affects employment and, eventually, leisure travel and jet fuel.
The EIA's revisions show the scale. Compared with its January outlook, it cut its 2025 world consumption growth forecast by 0.4 million barrels a day and its 2026 forecast by 0.1 million. The largest revision is for Asia, where growth is now expected to average 0.5 million barrels a day over the two years, down from 0.7 million in January. The changes for the Americas, Europe, the Middle East and Africa are smaller.
Asia bears the brunt because it is where both trade exposure and oil demand growth are concentrated. Export-oriented manufacturing economies feel tariff shocks quickly, and China's fuel demand was already weakening before the April announcements.
Prices are already reflecting it
Markets moved before forecasters. In the first quarter of 2025, crude oil prices reached a quarterly high of USD 82 a barrel on 15 January and then fell steadily, settling at USD 75 on 31 March. The EIA notes that its preliminary balances suggested global consumption actually outpaced production during the quarter, which would normally support prices. Prices fell anyway because of concerns about future economic growth.
US data reinforced those concerns. The EIA cites the Bureau of Economic Analysis estimate that US GDP declined 0.3 per cent in the first quarter of 2025, the first contraction since the first quarter of 2022. Refinery margins were mixed: gasoline crack spreads were above their five-year average at New York Harbor and Los Angeles in February but below average in March, while distillate cracks, weak through most of 2024, firmed during the winter on heating demand.
The supply side is not slowing
The demand downgrade arrives as supply growth outside OPEC+ remains strong. In its February outlook, the EIA estimated that world petroleum liquids supply grew by about 0.6 million barrels a day in 2024 and forecast growth of 1.9 million in 2025 and 1.6 million in 2026, driven by the United States, Guyana, Canada and Brazil.
Production outside OPEC+ grew by 1.8 million barrels a day in 2024 and is forecast to grow by the same amount in 2025. Over 2024 to 2026, the EIA expects growth of 1.1 million barrels a day in the United States, 0.5 million in Canada, 0.3 million in Guyana and 0.3 million in Brazil. Canada's growth is supported by the Trans Mountain expansion, and Brazil's by new floating production units at the Mero and Búzios fields in the Santos Basin. In Guyana, the EIA expects the Yellowtail, Uaru and Whiptail projects to bring Stabroek block capacity to about 1.3 million barrels a day by the end of 2027.
Put the supply and demand forecasts side by side and the arithmetic is uncomfortable for producers. If non-OPEC+ supply alone grows by around 1.8 million barrels a day in 2025 while consumption grows by less than 1 million, there is no room for OPEC+ to raise output without building inventories.
OPEC+ in a corner
The EIA's February outlook assumed that OPEC+ would raise crude production by only 0.1 million barrels a day in 2025, with the 2.2 million barrel-a-day voluntary cuts announced in November 2023 phased out gradually by the end of September 2026 and the earlier 1.65 million barrel-a-day cuts extended until the end of 2026. Even on that cautious path, OPEC+'s share of global crude output was forecast to slip to 46 per cent in 2025 and 2026, down from 53 per cent in 2016 when the expanded group was formed.
The group holds large spare capacity. The EIA estimated OPEC's surplus crude production capacity at 4.6 million barrels a day in 2024, more than double the 2019 level. Saudi Arabia produced 9.0 million barrels a day in 2024, 1.4 million less than in 2022.
That combination, large spare capacity, falling market share and weaker demand, creates pressure for a change of strategy. Holding back barrels made sense when demand was expected to grow and absorb them later. When demand growth slows and competitors keep expanding, restraint mainly cedes share. The weaker demand outlook makes the choice between price and volume more acute for the group's largest members.
Uncertainty cuts both ways
The EIA stresses that its forecast is highly uncertain. Tariff policy has been changing quickly, and a rollback or trade agreements could restore some of the lost growth. A sharper slowdown, by contrast, could push demand growth well below current forecasts. The agency suggests watching real-time indicators, including vessel traffic, truck tonnage and airport passenger numbers, alongside weekly US product supplied data. The United States accounts for about one-fifth of world oil consumption, which makes its weekly figures an important early signal.
What it means
The structural story of slowing oil demand growth was already in place before April 2025: electric vehicles and LNG trucks in China, efficiency gains in mature economies and slowing population growth. Tariffs have added a cyclical shock on top. For producers, the combination points to lower prices and more pressure on high-cost supply. For importers, it offers some relief after the price spikes of 2022. For forecasters, it is a reminder that oil demand is still, above all, a function of the world economy.