Slowing global oil demand amid extreme uncertainty about the future of U.S. trade and a coming supply surplus are expected to hobble U.S. oil production growth later this year and could lead to an annual decline in output in 2026, according to a new analysis by S&P Global Commodity Insights.
The latest update to the S&P Global Commodity Insights Global Crude Oil Markets Short-term Outlook—the first since the April 2 announcement of U.S. tariffs—now expects global oil (total liquids) demand growth to average 750,000 barrels per day (bpd) in 2025, a downward revision of 500,000 bpd from the prior outlook.
“Although the magnitude of a potential economic and oil demand downturn is as uncertain as the future course of U.S. tariffs, the impact will be negative,” said Jim Burkhard, Vice President and Global Head of Crude Oil Research, S&P Global Commodity Insights. “Initial warning signs of a potential downturn are only starting to come into view. The level of severity is now the big question.”
The new demand outlook represents a significant shift in momentum following strong oil demand growth in the first quarter of the year when demand grew by an estimated 1.75 million bpd year-over-year. In contrast, demand growth for the remaining quarters of year is now expected to average 420,000 bpd.
As a result of the declining demand outlook and expected supply surplus (likely widened by recent OPEC+ decisions to accelerate the pace of production increases), U.S. crude oil production is now expected to decline in 2026—the first year-on-year decline in U.S. production in roughly a decade, excluding the 2020 COVID-19 pandemic.
Production growth from offshore and other longer lead-time projects that are less sensitive to price—as well as a certain degree of lag time on impacts to onshore shale production—is expected to sustain year-on-year U.S. oil production growth this year. Total U.S production for 2025 is expected to average 13.46 million bpd (gain of 252,000 bpd year-over-year) before falling back to 13.33 million bpd for 2026—a 130,000 bpd decline.
“U.S. oil production growth has been a dominant feature in the oil market since 2022,” said Burkhard. “A price-driven decline in U.S. production would be a pivot point for the oil market—and set conditions for a potential price recovery. But much will depend on the severity of an economic slowdown and the impact on demand growth beyond 2025.”
The report findings are based on a price outlook of mid-to-low $60s per barrel for Dated Brent (low $60s or high $50s per barrel for WTI) on a monthly average basis for the remainder of the year. However, additional downside risk exists if there is little progress toward easing newly imposed trade barriers and if OPEC+ continues to accelerate the unwinding of production cuts, the report says.
“Dizzying changes to U.S. tariffs—both real and proposed—are taking their toll on market sentiment,” said Ian Stewart, Associate Director, S&P Global Commodity Insights. Our current outlook assumes that there will ultimately be some movement away from trade barriers to China as well as signs of progress in U.S. trade talks with Europe, Japan and other major trading partners. That means that the risk for additional downside is very real. Any periods of price strength are likely to be fragile.”
A previous S&P Global Commodity Insights analysis explored the potential impact of sustained $50 per barrel prices for WTI. That analysis found that U.S. Lower 48 onshore crude oil production could decline by more than 1 million bpd over 12 months at such a price level.
