IEA Raises Forecast of Global Oil Demand Growth in 2026
The world’s oil demand growth is set to rise by 930,000 barrels per day (bpd) in 2026, thanks to lower oil prices and a normalization of economies after the 2025 tariff chaos, the International Energy Agency (IEA) said on Wednesday, raising its demand growth estimate by 70,000 bpd from last month.
Oil demand is forecast to grow by an average 930,000 bpd this year, accelerating from 850,000 bpd in 2025, the agency said in its closely-watched Oil Market Report for January.
In the December report, the IEA had expected global oil demand growth at 860,000 bpd for 2026.
The upgrade reflects a recovery in feedstock demand in the petrochemicals industry, on top of expectations of normalized economic conditions after the unpredictable and chaotic tariff policy of the Trump Administration last year.
The tariff threats haven’t gone away, but global trade and economies appear to have overcome the initial shock.
Despite lower output from Kazakhstan and a number of Middle Eastern OPEC producers in recent weeks, global oil supply is now projected to rise by 2.5 million bpd this year to 108.7 million bpd, following a jump of 3 million bpd in 2025, according to the IEA.
Yet, the implied surplus on the global oil market would be lower compared to last month’s estimate. In December, the IEA expected an implied surplus of 3.84 million bpd, while in the January report the implied glut is 3.69 million bpd, mostly due to the increase in the IEA’s demand growth forecast.
Inventories are rising, in both crude and products, and weigh on global oil prices, despite brief spikes driven by geopolitical developments in Venezuela and Iran, the Paris-based agency noted.
“Indeed, benchmark crude oil prices remain $16/bbl lower than a year ago, reflecting the large global supply surplus that built up over the past 12 months, in line with our forecasts,” the IEA said.
Observed global oil stocks rose by 1.3 million bpd on average in 2025, visible in the surge in oil on water, higher Chinese crude stocks, and a rise in U.S. gas liquids inventories, the agency noted.
“For now, bloated balances provide some comfort to market participants and have kept prices in check,” the IEA said.
By Tsvetana Paraskova for Oilprice.com
USGS Uncovers Massive New Oil and Gas Potential in the Permian Basin
- USGS estimates 28.3 Tcf of gas and 1.6 billion barrels of oil are technically recoverable in the deep Woodford and Barnett shales, challenging claims that U.S. shale resources are nearing exhaustion.
- Commercial viability remains uncertain, as the formations are deeper, hotter, more gas-prone, and technically complex.
- The discovery comes amid weak shale conditions, with low oil prices, falling rig counts, and rapid well decline rates forcing producers to drill aggressively just to maintain output.
A new discovery in the Permian Basin is challenging the narrative that shale oil and gas in the United States is declining.
The United States Geological Survey (USGS) has released its assessment of undiscovered gas and oil in the Woodford and Barnett shales in the Permian Basin, assessing that there are technically recoverable resources of 28.3 trillion cubic feet of gas — enough to supply the United States for 10 months at the current rate of consumption — and 1.6 billion barrels of oil, or 10 weeks’ supply.
If that doesn’t sound like much, consider that since the 1990s, the Woodford and Barnett shales have only produced 26 million barrels of oil, the equivalent of one day’s consumption. From the Jan. 14 USGS news release:
The Permian Basin has long been one of the most abundant sources of U.S. energy. The organic-rich shales of the Woodford and Barnett occur up to 20,000 feet below the surface, at greater depths than other resources in the Permian. Advances in unconventional production – hydraulic fracturing and horizontal drilling – now make it possible to produce energy resources from previously inaccessible and technically challenging formations, such as the Woodford and Barnett.
However, there are challenges in recovering the oil and gas trapped in this particular shale rock. Toti Larson, principal investigator at the Bureau of Economic Geology's Mudrock Systems Research Laboratory at the University of Texas, which specializes in shale research, told the Houston Chronicle that the reserves are deeper than the formations where companies traditionally drill, and hotter, meaning they contain more associated gas. In the Barnett there is more clay, which poses drilling hazards.
“And then the other complexity is just really trying to identify the sort of sweet spots,” Larson said. “Where across the Permian Basin is the Woodford most likely going to produce oil? And so I think that’s what makes the Woodford still an exploration target.”
The discovery in the Permian Basin, which straddles West Texas and New Mexico, comes at a challenging time for US shale.
The United States is rushing to sell off millions of barrels of Venezuelan oil after the Trump administration ousted and detained leader Nicholas Maduro on Jan. 3.
The Department of Energy is organizing the sale of about 50 million barrels of oil that the United States seized from Venezuelan tankers.
Today’s oil market is already saturated, faced with a persistent global oil glut, and oil companies can’t afford for prices to dip much lower than their current levels of around $60 per barrel. Production is already projected to exceed demand in 2026, thanks in large part to OPEC’s reversal of production cuts over the last year, without even factoring in a Venezuelan oil renaissance.
Against this backdrop and from where US shale producers are standing, a flood of cheap oil and gas onto the global market is a nightmare scenario. The number of operating rigs in Texas oil country is already down nearly 15% this year as producers anxiously wait for prices to climb back up. As a result, the economy is already slowing down across West Texas. “It has really cast a shadow over the Permian,” Ben Shepperd, president of the trade group Permian Basin Petroleum Association, recently told the Wall Street Journal.
Shale wells decline fast, forcing constant drilling—the “Red Queen” effect—with many losing 70–90% of output in three years.
The International Energy Agency (IEA) says global fields are depleting faster than thought, so most spending now just fights decline.
Shale oil wells are gushers in their first year, then deplete rapidly. Shale companies, therefore, have to keep ploughing more money into production just to keep output flat, a phenomenon known as the “Red Queen Syndrome,” named after Lewis Carroll’s ‘Alice’s Adventures in Wonderland’. Shale wells typically bleed off 70 to 90% in their first three years and drop by 20 to 40% a year without new drilling.
A recent IEA report confirms this, stating that the world’s oil and gas fields are declining at a faster rate than previously thought, leaving the energy sector facing a costly battle to maintain output.
In fact, since 2019 oil and gas groups have spent $500,000 on oil and gas production, nearly 90 percent of annual investment, simply to arrest the decline in existing fields.
“The situation means that the industry has to run much faster just to stand still,” IEA boss Faith Birol was quoted saying.
By Andrew Topf for Oilprice.com
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