U.S. oil output expected to level off as demand dwindles because of price decrease
Title: OPEC and IEA: Divergent Oil Demand Forecasts and Their Impacts
On May 14, OPEC set the first bend in the oil forecast road. Their forecast for the pace of oil demand growth remained unchanged at 1.3 million barrels per day (bpd) in 2025 and 1.28 million bpd in 2026. A month before, these figures had been trimmed down by 150,000 bpd due to the U.S.-instigated global trade war. However, the estimated increase in production is now at 800,000 bpd, not 900,000 bpd as initially expected.
Riding the wave the next day, analysts at the IEA (published May 15) predicted global oil demand growth of 741,000 bpd, making it a tad higher than the organization's April forecast. This enthusiasm in the growth expectations might suggest some optimism about a potential compromise between the U.S. and its major trading partners, as opposed to further escalation of the conflict. Just days ago, a temporary ceasefire had been reached, with both parties reducing tariffs to 10-30%.
Nikolai Dudchenko, an analyst at FG "Finam," weighed in an interview with "Expert" magazine and said, "The forecasts of the IEA and OPEC already factor in the situation with tariff wars. However, it's essential to understand that these organizations do not have the inside scoop on how the negotiation track will unfold, so their forecasts are far from the final word."
In contrast to the IEA, which tends to have a consumer-centric perspective, OPEC represents the producing countries and is inclined to favor higher demand growth estimations, as it ensures stability for the cartel members and maintains pricing control.
In April 2025, eight OPEC+ countries were slated to up their production by 115,000 b/d to 30.33 million b/d compared to March. However, they actually produced 30.81 million b/d, with over-producers such as Kazakhstan, Iraq, and the UAE breaking their production quotas.
Both OPEC and the IEA expect slower production growth from non-OPEC+ countries, where increased exploration and production costs, exacerbated by the trade war, are expected to decrease E&P costs by about 5% in 2025 and 2% in 2026. In the U.S., investments in liquid hydrocarbon exploration and production decreased by 8% year-on-year in 2024 and are projected to plunge further in 2025 and 2026.
The bottom line? The differences between the OPEC and IEA's forecasts persist, with OPEC's perceived to be more accurate due to its cartel-centric approach in calculating the market balance. In the words of Vladimir Chernov from Freedom Finance Global, "If you're in it to win it, put your trust in OPEC's forecasts."
The financial analyst, Nikolai Dudchenko, mentioned that both OPEC and the IEA have taken the tariff wars into account in their forecasts, but their perspectives differ, with OPEC, an organization representing producing countries, favoring higher demand growth estimations to ensure stability for cartel members and maintain pricing control. On the other hand, the IEA, known for its consumer-centric view, predicts a more moderate oil demand growth, reflecting potential optimism about a compromise between the U.S. and its major trading partners in the oil-and-gas industry.
