The US may reduce its oil production which could lead to an annual decline in output in 2026 due to the sluggish demand and falling crude prices, according to a new analysis by S&P Global Commodity Insights.
The report noted that slowing global oil demand, extreme uncertainty about the future of US trade and a coming supply surplus are expected to hobble US oil production growth.
The report, S&P Global Commodity Insights Global Crude Oil Markets Short-term Outlook, found that global oil (total liquids) demand grew to an average 750,000 barrels per day (b/d) in 2025, a downward revision of 500,000 b/d from the prior outlook.
“Although the magnitude of a potential economic and oil demand downturn is as uncertain as the future course of US tariffs, the impact will be negative. Initial warning signs of a potential downturn are only starting to come into view. The level of severity is now the big question,” said Jim Burkhard, Vice President and Global Head of Crude Oil Research, S&P Global Commodity Insights.
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 b/d year-over-year. In contrast, demand growth for the remaining quarters of year is now expected to average 420,000 b/d, the report added.
The report added that the total production for 2025 in the US is expected to average 13.46 million b/d (gain of 252,000 b/d year-over-year) before falling back to 13.33 million b/d for 2026 — a 130,000 b/d decline.
“US oil production growth has been a dominant feature in the oil market since 2022. A price-driven decline in US 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,” Burkhard added.
Ian Stewart, Associate Director, S&P Global Commodity Insights said that dizzying changes to US tariffs — both real and proposed — are taking their toll on market sentiment.
“Our current outlook assumes that there will ultimately be some movement away from trade barriers to China as well as signs of progress in US 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,” Stewart added.
Published on May 14, 2025
