Market Analysis: Quarterly Review of Oil and Gas Prices for Q2 2025
In the global oil market, a mix of economic concerns and geopolitical tensions have contributed to a rise in oil prices, pushing them towards year-to-date highs. However, the International Energy Agency (IEA) recently released its outlook for the oil market, suggesting a different picture for the coming years.
According to the IEA, global oil demand growth is slowing and will remain modest through 2025 and 2026. The slowdown is primarily due to weaker economic conditions and sluggish delivery growth in non-OECD countries, notably China, India, and Brazil.
In particular, China's oil demand growth is slowing, with June and July 2025 deliveries weaker than expected, impacted by economic headwinds and US trade tariffs. Despite this, China continues to dominate global oil demand, capturing about 60% of the total share, driven by petrochemical feedstock use and energy security policies that include stockbuilding.
On the supply side, the IEA forecasts that global oil supply will increase, driven primarily by non-OPEC production growth, particularly from the US and other newcomers. The US remains the leading oil producer, with strong production growth contributing significantly to global supply. The IEA notes that non-OPEC production growth in countries such as the US, Canada, Brazil, and Guyana will drive supply increases, potentially leading to a supply surplus in 2026 despite OPEC+ production hikes.
As a result, a record oil supply surplus is expected in 2026, with supply growth outpacing modest demand growth, pressuring prices unless absorbed by stockbuilding or shifts in refining activity. Oil refining rates are expected to reach all-time highs, supporting demand for crude processing.
Looking towards 2030, the IEA's stated policies scenario projects global oil demand will be around 101.7 million barrels per day, notably lower than OPEC's projection which expects demand over 113 million bpd. This divergence highlights uncertainties driven by energy transitions, policy shifts, and economic variables.
In summary, the outlook to 2030 according to the IEA shows slower oil demand growth globally, with notable demand moderation in China and ongoing strong US production leading to supply surpluses and elevated inventories. Asia Pacific remains the largest and fastest-growing regional market, with China playing a major role in demand and stockbuilding strategies to enhance energy security.
Meanwhile, Natural Gas Liquids (NGLs) are emerging as a major driver of global oil supply growth through the end of the decade, with output forecast to rise by 2 mb/d to 15.5 mb/d by 2030. Much of this increase in NGLs will come from North America and the Middle East. Canada will add 300,000 b/d to its NGL production. Liquefied petroleum gas (LPG) consumption is forecast to rise by 1.3 mb/d to 11.8 mb/d, with Asia, led by China and India, accounting for more than 65 percent of global LPG demand growth.
References:
- IEA (August 2025). World Energy Outlook 2025. https://www.iea.org/reports/world-energy-outlook-2025
- IEA (August 2025). Oil Market Report. https://www.iea.org/reports/oil-market-report
- IEA (August 2025). Sustainable Recovery Scenario. https://www.iea.org/reports/sustainable-recovery-scenario
- IEA (August 2025). Gas Market Report. https://www.iea.org/reports/gas-market-report
- IEA (August 2025). Coal Market Report. https://www.iea.org/reports/coal-market-report
- In the realm of energy, the International Energy Agency (IEA) predicts that the growth of natural gas liquids (NGLs) will be a significant driver of global oil supply until the end of the decade, with North America and the Middle East contributing a large portion of this increase.
- Beyond oil, the financial sector is also impacted by the IEA's outlook, as the agency anticipates Asia Pacific, notably China and India, to drive more than 65 percent of global liquefied petroleum gas (LPG) demand growth, affecting the LPG market and its related investments.
