Crude realities: Shaky balance in oil’s supply and demand shifts

This blog post is part of a special series based on the April 2025 Commodity Markets Outlook, a flagship report published by the World Bank. This series features concise summaries of commodity-specific sections extracted from the report. Explore the full report here.

The first four months of the year have been turbulent for oil markets. Brent crude oil plunged by more than $12 per barrel ($/bbl) in the four trading days following April 2. This marked the 11th-worst four-trading-day price performance since 1990 and was accompanied by a 50 percent surge in anticipated oil price volatility. Brent closed at $61.15/bbl on May 2, a notable decline from the 2025Q1 average of $75/bbl. Earlier in the year, Brent prices had climbed about 10 percent in January after new U.S. sanctions were imposed on vessels linked to the Russian Federation and the Islamic Republic of Iran. Subsequently, prices retreated as concerns over global growth mounted, driving the Urals price below the $60/bbl cap stipulated by the G7-led Price Cap Coalition. In March and April, OPEC+ first announced the partial reversal of its 2.2 mb/d voluntary cuts, and later signaled an unexpectedly large production increase of about 0.4 mb/d starting in March.

Oil demand growth lost momentum in 2024. Demand growth showed signs of fatigue in 2024, with acceleration in some regions offset by a slowdown in key economies. Oil consumption growth decelerated in China, Europe and Central Asia, and Latin America and the Caribbean, but intensified in East Asia and the Pacific excluding China, the Middle East and North Africa, and South Asia. Demand was flat in advanced economies and decreased in Sub-Saharan Africa. In China, an average of 0.45 mb/d oil was displaced by the increasing penetration of electric vehicles, which accounted for more than 40 percent of new car sales in 2024. Despite the slowdown, global oil demand is expected to reach a record high of 103.5 mb/d in 2025 and rise further to 104.2 mb/d in 2026. 

Oil supply continued to rise in the last two quarters. In 2024Q4 and 2025Q1, global oil supply increased by 0.2 mb/d (y/y) and by 1.3 mb/d, respectively. However, supply in 2025Q1 decreased by 0.3 percent compared to the previous quarter, as freezing temperatures in January disrupted production in Canada and the United States for the second year in a row. Growth in oil production in 2024 was fueled by advanced economies and Latin America and the Caribbean, offsetting a decrease in the Middle East and North Africa. Throughout the year, the oil market remained tight, owing largely to the elevated level of spare capacity withheld from the market by OPEC+. Even so, in 2025Q1 a supply surplus of 0.7 mb/d emerged.

Production is likely to outstrip consumption in 2025 amid moderating demand. Global oil supply is expected to increase by 1.2 mb/d in 2025—almost double the rise seen in 2024—reaching a new all-time high of 104.2 mb/d. On the other hand, oil demand is expected to rise by only 0.7 mb/d in both 2025 and 2026, about half the average annual increase observed during 2015-19. This reflects an expected global economic slowdown, as well as the continued decline in the oil intensity—the amount of oil required to produce a unit of economic output globally. Consumption in key energy-consuming countries is also expected to be adversely affected by the economic fallout from elevated trade tensions. 

Risks to the oil price forecast are tilted to the downside. The Brent oil price is projected to average $64/bbl in 2025—almost $17 lower than in 2024—before declining further to $60/bbl in 2026. Global economic growth could slow more than currently anticipated, potentially triggered by persistently high policy uncertainty or a further escalation of trade tensions. In a downside scenario premised on the 10th percentile of private sector growth forecasts across major economies, oil prices could decline by 26 percent between 2024 and 2025, averaging about $59/bbl. Additional downside risks include greater-than-expected oil output from OPEC+. Conversely, oil prices could rise if policy actions ameliorate trade tensions, resulting in better-than-expected global demand. Higher prices could also result from tightening oil sanctions on oil-exporting countries.