Global Oil Demand Growth Slows Amid Economic Uncertainty and EV Surge: IEA

Global oil demand growth is expected to slow significantly through the remainder of 2025, according to the International Energy Agency (IEA), which cited economic pressures and record electric vehicle (EV) sales as key drivers behind the deceleration.

In its May oil market report released Thursday, the Paris-based agency projected demand growth will average just 650,000 barrels per day (bpd) for the rest of the year—down from 990,000 bpd recorded in the first quarter of 2025.

“Increased trade uncertainty is expected to weigh on the world economy and, by extension, oil demand,” the IEA stated, pointing to macroeconomic headwinds as a significant factor.

Despite the quarterly slowdown, the agency has slightly revised its full-year global oil demand growth forecast upward to 740,000 bpd—20,000 bpd more than last month—thanks to expectations of stronger economic activity and lower oil prices boosting consumption. Looking ahead to 2026, the IEA expects a similar growth rate of 760,000 bpd.

On the supply side, the IEA sharply increased its forecast for global oil supply growth, raising its estimate by nearly 400,000 bpd to 1.6 million bpd for 2025. This revision comes largely on the back of expected production increases from Saudi Arabia, which the IEA identified as the primary contributor to the upward adjustment.

“Saudi Arabia accounts for almost all of the hike in the IEA’s 2025 supply growth forecast,” the report said, noting that the kingdom remains the only major producer with spare capacity under current output levels. The OPEC+ alliance recently agreed to accelerate production increases again in June.

Conversely, the IEA downgraded its forecast for U.S. shale output by 40,000 bpd in 2025 and by 190,000 bpd in 2026, citing weaker price conditions. “Based on continued price weakness, we expect more activity cuts over the coming quarters,” the agency noted.

A widening gap between supply and demand is expected to lead to a substantial rise in global oil inventories. The IEA forecast average storage increases of 720,000 bpd this year, in contrast to a 140,000 bpd decline in 2024.

The Organization of the Petroleum Exporting Countries (OPEC) had also issued a report this week, trimming its own forecast for 2025 oil supply growth from non-OPEC+ producers, including the United States.

The IEA’s findings suggest that while oil supply is on the rise, global demand—tempered by shifting energy preferences and economic instability—may not keep pace, setting the stage for growing stockpiles and continued volatility in global energy markets.