The global oil market is projected to experience an oil glut in 2025 and 2026, driven by increasing production and decelerating demand growth. This analysis is based on the World Bank's flagship "October 2025 Commodity Markets Outlook" report.
Oil prices demonstrated volatility throughout 2025. Brent prices briefly rose by 5 percent towards the end of October, reaching approximately $65 per barrel, following new U.S. sanctions against Russian oil companies. However, overall, oil prices declined during the year due to ongoing trade policy tensions and concerns over excess supply. The drop in Brent contributed to Urals prices falling below the $60/bbl price cap, which was subsequently lowered to $47.6/bbl in September.
Global oil demand growth continues to weaken. In Q3 2025, global oil demand increased by only 0.8 million barrels per day (mb/d), or 0.7 percent year-on-year, indicating sluggish growth relative to the 2015-2019 average. This trend is expected to persist, leading to projected annual demand of 103.8 mb/d in 2025 and 104.5 mb/d in 2026. Consumption in advanced economies is anticipated to remain stable, while growth in China will likely moderate due to the accelerated adoption of electric and hybrid vehicles. India is expected to be a major contributor to demand growth, driven by liquefied petroleum gas (LPG), gasoline, naphtha, and diesel.
Conversely, oil supply is projected to increase in 2025 and 2026 as new production comes online. Output is anticipated to grow by 3.0 mb/d (2.9 percent) year-on-year to 106.1 mb/d in 2025, further rising to 108.5 mb/d in 2026. Much of this increase is attributed to higher production targets from OPEC+, alongside supply growth in the Middle East and North Africa, Afghanistan, and Pakistan (MNA), and Latin America and the Caribbean (LAC), although slowing in advanced economies.
The convergence of surging production and lackluster consumption growth is generating a substantial global oil surplus. The implied surplus is estimated at 2.7 mb/d in Q3 2025. The International Energy Agency (IEA) forecasts an annual surplus of 2.3 mb/d in 2025, dramatically increasing to 4.0 mb/d in 2026, surpassing the surplus observed during the 2020 pandemic outbreak.
Brent oil prices are projected to average $68/bbl in 2025, decline to $60/bbl in 2026, and then rise to $65/bbl as market conditions stabilize. Risks to this price forecast are tilted to the downside, though several factors could push prices higher:
- Potential increases in OPEC+ production targets.
- Renewed trade tensions.
- Heightened policy uncertainty.
Conversely, prices could exceed baseline projections if the market is tighter than expected, possibly due to:
- Stronger-than-expected demand from major non-OECD consumers.
- Limited supply growth resulting from OPEC+ constraints or reduced U.S. output.
- Escalating conflicts in regions such as the Middle East or Ukraine.
- The market impact of additional sanctions, including recent U.S. measures against Russian oil companies.