OPEC slashes 2026 oil demand growth forecast on OECD weakness

OPEC has lowered its forecast for global oil demand growth in 2026, citing weaker consumption in advanced economies and signs of moderation in Asia, even as supply disruptions and price volatility continue to unsettle markets. 

In its Monthly Oil Market Report released Wednesday, the producer group said demand will rise by 1.2 million barrels per day (bpd) this year, down from 1.4 million bpd projected earlier, bringing total consumption to 106.3 million bpd.

The revision underscores the challenges facing the oil market as geopolitical tensions, high prices, and slowing industrial activity combine to dampen demand. 

Demand outlook

OPEC’s latest assessment shows OECD demand nearly flat, with growth of just 100,000 bpd.

The Americas are expected to see a modest increase of 200,000 bpd, led by LPG and gasoline, but Europe is forecast to contract slightly by 30,000 bpd due to weaker industrial activity and consumer demand. 

In the Asia-Pacific, demand is projected to ease by 80,000 bpd, driven largely by Japan’s moderation.

Non‑OECD countries remain the main driver of growth, contributing 1.1 million bpd.

China is expected to add 250,000 bpd, supported by petrochemical feedstock demand, while India is forecast to grow by 200,000 bpd, underpinned by strong vehicle sales and infrastructure activity. 

Other Asian economies, led by Indonesia, will contribute 240,000 bpd, reflecting regional petrochemical expansion.

Looking ahead, OPEC projects stronger growth in 2027, with demand rising by 1.5 million bpd.

The group revised its 2027 forecast upward by 200,000 bpd, citing expectations of a firmer economic backdrop and continued expansion in non‑OECD markets.

Supply outlook

On the supply side, OPEC reported that its own crude production fell in April by 1.74 million bpd, averaging 33.2 million bpd. 

Non‑OPEC liquids production is forecast to grow by 600,000 bpd in 2026, driven by Brazil, the United States, Canada, and Argentina.

The group noted that while non‑OPEC supply growth remains steady, it is insufficient to offset the broader demand slowdown.

OPEC emphasised that geopolitical risks, particularly in the Middle East, continue to cloud the supply outlook.

“Geopolitical tensions and trade disruptions remain key risks to demand recovery and supply stability,” the report said.

Price movements

Oil prices have reflected the shifting fundamentals.

The OPEC Reference Basket (ORB) averaged $108.79 per barrel in April, down $7.57 from March.

Brent averaged $102.46 per barrel, while WTI rose to $98.67 per barrel. 

Oman crude dropped sharply by $20.65 per barrel to $103.91 per barrel, reflecting sour crude supply disruptions.

OPEC noted that price volatility remains elevated, with sour crude grades particularly affected by regional supply constraints.

Refining margins have come under pressure in Europe and the United States, while Asia has shown resilience due to limited crude availability.

Inventories and stocks

OECD commercial oil inventories fell by 21.6 million barrels in March, standing at 2.77 billion barrels.

Crude stocks rose slightly, but product stocks fell sharply by 48.4 million barrels. 

The group warned that declining product inventories could tighten markets further if demand surprises to the upside later in the year.

“Tanker freight rates remain volatile, with VLCC rates down from record highs but still elevated compared to last year,” OPEC added, highlighting ongoing disruptions in global shipping.

Risks and outlook

OPEC’s report stressed that the balance of risks remains tilted to the downside.

Weak OECD demand, moderating Asian growth, and persistent geopolitical tensions all weigh on the outlook. 

The group also flagged potential headwinds from monetary policy tightening and slower industrial activity in Europe.

At the same time, OPEC pointed to areas of resilience.

India’s demand growth remains robust, supported by infrastructure spending and rising vehicle sales. 

China’s petrochemical sector continues to underpin consumption, even as broader economic growth moderates.

Non‑OECD Asia is expected to remain a key driver of demand expansion.

The May Monthly Oil Market Report paints a picture of a market facing both structural and cyclical challenges. 

With demand growth trimmed, supply disruptions ongoing, and inventories falling, OPEC’s warning is clear: the global oil market remains vulnerable to shocks, and recovery will depend on both economic momentum and geopolitical stability.

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