Oil Markets in Flux: Balancing Supply Growth, Demand Weakness, and Geopolitical Shocks

The global oil market stands at a pivotal moment. Data from the International Energy Agency's Oil Market Report (OMR) and the latest OPEC outlook paint a complex picture: robust supply growth, sluggish demand recovery, and intensifying geopolitical currents that threaten to reshape trade flows. Beneath seemingly stable headline prices, deep structural shifts are underway.

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Demand: A Fragile Recovery

Global oil demand is projected to rise by 680,000 barrels per day (bpd) in 2025 and 700,000 bpd in 2026, reaching 104.4 million bpd. But this growth is modest compared to earlier cycles. Since the start of 2025, demand forecasts have been repeatedly downgraded—by some 350,000 bpd—due to weaker consumption in China, India, Brazil, and Egypt.

The OECD, long the anchor of global demand, remains stagnant, with Japan hitting multi-decade lows. Emerging markets have underperformed expectations, with consumer confidence still depressed. The lone bright spot has been aviation, where jet fuel demand hit record highs in the U.S. and Europe, propelling global kerosene use up 2.1% this year. Yet, at 7.7 million bpd in 2025, jet fuel demand will still fall short of pre-pandemic levels.

Meanwhile, OPEC has taken a more bullish stance. In August, the cartel revised its 2026 oil demand growth estimate upward to 1.38 million bpd, citing stronger-than-expected economic performance in North America, Europe, the Middle East, and Africa. If realized, this would push global consumption above 106.5 million bpd by 2026.

Supply: Non-OPEC+ Leads, but OPEC+ Regains Ground

On the supply side, the IEA sees global oil output at 105.6 million bpd in July, broadly steady as OPEC+ declines were offset by non-OPEC+ gains. Crucially, supply growth is accelerating:

• 2.5 million bpd in 2025