IEA Oil Market Report - June 2025

Highlights

• World oil demand is forecast to increase by 720,000 barrels per day (b/d) in 2025. This is marginally below last month’s estimate, as weak 2Q25 deliveries in the United States and China undercut resilience elsewhere. Growth in 2026, at 740 kb/d, will be held back by a challenging economic outlook and the uptake of clean energy technologies.
• Global oil supply rose by 330 kb/d in May to 105 mb/d, 1.8 mb/d above a year ago. Monthly gains were evenly split between non-OPEC+ and OPEC+ as the producer alliance started unwinding some voluntary production cuts. World oil supply is projected to rise by 1.8 mb/d to 104.9 mb/d in 2025 and by 1.1 mb/d in 2026, led by non-OPEC+ gains of 1.4 mb/d and 840 kb/d, respectively.
• Refinery throughputs are forecast to rise by around 460 kb/d in both 2025 and 2026, to average 83.3 mb/d and 83.7 mb/d, respectively. Refining margins in May were at their highest levels since 1Q24. However, the rally in crude prices in early June squeezed profitability levels as gasoline, naphtha, and fuel oil cracks weakened.
• Russian crude and product exports fell by 230 kb/d m-o-m to 7.3 mb/d in May, down 380 kb/d y-o-y. As oil prices slid, revenues declined by $480 million m-o-m to $12.6 billion, a plunge of $4.0 billion y-o-y. May’s crude export revenues hit their lowest level since February 2021, and products their lowest since June 2023.
• Global oil stocks rose for a third consecutive month, by 32.1 mb in April to 7,717 mb, led by builds in crude oil inventories in the non-OECD. While global stocks have built by 1 mb/d on average since February, total inventories remain 90 mb lower y-o-y. OECD industry stocks fell by 9 mb to stand 97 mb below a year ago. Preliminary data show global oil inventories surged in May.
• Brent futures rallied by $5/bbl to $74/bbl after Israel's 13 June air strikes on Iran’s nuclear and military facilities. May and early June prices were range-bound as trade tensions subsided somewhat after the United States and China agreed to a three-month tariff détente. Conversely, plans by OPEC+ to accelerate the unwinding of voluntary output cuts added to the prospect of comfortable 2H25 balances.

Oil Market Outlook

Global oil demand is expected to grow modestly in 2025, rising by just 720,000 barrels per day (bpd), with similar growth projected for 2026. Meanwhile, global oil supply continues to expand, reaching nearly 105 million bpd in May 2025, up 1.8 million bpd compared to the same time last year. This rise is driven by both OPEC+ producers unwinding earlier production cuts and increased output from non-OPEC countries.

Total OPEC+ output stood at 42.2 million bpd in May, with OPEC’s core members producing around 27.76 million bpd and non-OPEC+ contributors adding 14.45 million bpd. Refining throughput is expected to increase by 460,000 bpd annually in both 2025 and 2026. However, higher crude prices — Brent briefly averaged around $74 per barrel in June amid geopolitical tensions — have pressured refining margins.

Russian crude exports declined by about 230,000 bpd in May, slashing monthly oil revenues by $480 million. Global oil inventories rose by over 32 million barrels in April, though OECD stockpiles remain 97 million barrels below 2024 levels. Overall, the market remains well-supplied, but risks from geopolitical tensions — especially in the Middle East — keep volatility elevated.

Natural Gas Market Update

Natural gas demand surged during the 2024–2025 winter, growing by approximately 1.8% globally due to cold conditions in Europe and North America. Europe saw a year-on-year increase of nearly 10% as gas-fired power compensated for weak renewable output. North America experienced record-high winter demand, while China and Russia saw declines due to milder weather.

Looking ahead, the IEA forecasts global gas demand will grow just 1.5% in 2025. European gas storage levels are lower than last year, prompting strong LNG import demand through the rest of the year. Global LNG supply rose only 2% over the last heating season but is expected to increase by 5% in 2025, thanks to new export projects in North America.

Despite this, limited Russian pipeline gas flows and tight global markets continue to support higher prices, especially in Europe. The supply-demand balance will remain sensitive to weather, storage rebuilds, and geopolitical disruptions.

Electricity Sector Trends

Electricity demand is accelerating worldwide. In 2024, global electricity consumption rose by 4.3%, with continued annual growth of around 4% expected through 2027. This trend is largely driven by the electrification of transport, industry, and buildings.

Renewables and nuclear are meeting nearly all the new demand. Massive deployment of solar and wind — especially in China, the U.S., and the EU — is transforming the power sector. In 2025, renewables are expected to surpass coal to become the largest source of global electricity generation.

These changes are supported by strong policy measures such as the EU’s REPowerEU plan and the U.S. Inflation Reduction Act, reinforcing the transition to low-carbon power systems.

Renewables Expansion

The growth in renewable energy is unprecedented. In 2023 alone, the world added approximately 560 gigawatts of new renewable capacity, led by solar PV. Solar accounted for more than half of all new global power additions and continues to drive renewable expansion at a record pace.

By 2030, global renewable electricity generation is forecast to reach over 17,000 terawatt-hours — nearly double the 2023 level. In 2025, renewables are expected to become the largest source of electricity generation globally, overtaking coal for the first time.

China added nearly 350 GW of new renewable capacity in 2023, while the EU added almost 80 GW. Solar is projected to overtake hydropower by 2029 as the leading renewable source. The rapid deployment of clean energy technologies is key to meeting both climate goals and growing electricity needs across the globe.

Geopolitical risk in focus

Global oil markets were roiled by a rapid escalation in geopolitical tensions after Israel launched a series of air strikes on targets in Iran on 13 June and Tehran retaliated. The two countries have fought a shadow war for decades, but the current conflict is the most severe, with energy infrastructure also targeted for the first time. While there was no impact on Iranian oil flows at the time of writing, fears of a widening regional disruptions to oil traffic through the crucial Strait of Hormuz drove oil prices higher, with Brent crude futures reaching a six-month high of $74/bbl.

Iran currently produces around 4.8 mb/d of crude, condensates, and NGLs, with total oil exports of about 2.6 mb/d. While the US administration has recently intensified sanctions on buyers of Iranian oil supplies, Iran’s exports of crude and condensates have remained unchanged, averaging around 1.7 mb/d so far this year, with most of it going to China. Iran is also a significant oil product exporter, with shipments of fuel oil, LPG, and naphtha averaging nearly 800 kb/d since January.

Iran partially suspended production at the world’s biggest natural gas field, South Pars, after an Israeli strike caused a fire in what would be the first Israeli attack on Iran’s oil and gas sector. It is still unclear if condensate and NGL production from the South Pars Phase 14 field has been impacted. It has a capacity of 2 bcf/d of gas, 75 kb/d of condensate, and roughly the same amount of ethane and LPG. The Shahran oil depot and refinery near Tehran were also targeted, but reportedly no major damage occurred. Israel, meanwhile, has halted more than 60% of its natural gas production capacity, including at the offshore Leviathan field, on security concerns, and has reported that Iranian strikes have damaged its Haifa refinery.

Iran has repeatedly threatened to close the key Strait of Hormuz if attacked. Closure of the Strait, even for a limited period, would have a major impact on global oil and gas markets. The Strait is the exit route from the Gulf for around 25% of the world's oil supply, including from Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, and Iran, and most of the world’s spare production capacity.

In the absence of a major disruption, oil markets in 2025 look well supplied. World oil demand is forecast to increase by 720 kb/d this year, marginally below last month’s estimate as weak 2Q25 deliveries in the United States and China undercut resilience elsewhere. Meanwhile, global oil supply in May was up by 1.9 mb/d from a year ago, led in part by the unwinding of voluntary OPEC+ production cuts. For 2025 as a whole, world oil supply is projected to rise by 1.8 mb/d to 104.9 mb/d and by an additional 1.1 mb/d in 2026. Non-OPEC+ producers are forecast to add 1.4 mb/d on average this year and 840 kb/d next year.

With supply exceeding demand, global observed oil inventories have risen by 1 mb/d on average since February, and by a massive 93 mb in May alone, according to preliminary data available. But while the market looks comfortably supplied now, the recent events sharply highlight the significant geopolitical risks to oil supply security. The IEA remains deeply committed to working with energy producers and consumers to safeguard energy security.