US oil output to decline in 2026; Indian import plans may be hit

S&P forecasts slower US production from later this year due to slowing global demand

The likely decline in the US crude production later this year due to various factors, including slowing down of global oil demand, might impact the plans of Indian oil marketing companies to import more from the country, a senior official said.

 

The S&P Global Commodity Insights in its latest Global Crude Oil Markets Short-term Outlook forecasted that despite the US administration's push to raise domestic crude production, slowing global oil demand amid uncertainty about the future of the US trade and a looming supply surplus are expected to impact the country’s oil production growth later this year.

 

The changing demand scenario could lead to an annual decline in output in 2026, the first year-on-year decline in US production in roughly a decade, excluding the 2020 Covid pandemic, according to the report.

 

“Even before the tariff hikes, US producers were in no position to ramp up production in the current pricing climate. This has been raised in bilateral talks as well,” the senior refinery official stressed.

 

As a result, crude imports from the US may shrink in late 2025, he said.

 

The US is pressuring India to negotiate term contracts for American energy with US producers, but talks have been slow.

 

Currently, US crude volume flows to India remain strong. It was the only major source nation from which crude flows rose in February. US crude imports to India rose 189 per cent to $376 million during the month, official data shows. 

 

Total US production for 2025 is expected to average 13.46 million barrels per day (b/d), representing an annual rise of 252,000 b/d. The production is expected to shrink by 130,000 b/d to 13.33 million b/d in 2026, it said.

 

Production growth from offshore and other longer lead-time projects that are less sensitive to prices, and a lag time on impacts to onshore shale production is expected to sustain year-on-year US oil production growth this year.

 

“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,” Jim Burkhard, vice- president and global head of Crude Oil Research, S&P Global Commodity Insights, said. The severity of an economic slowdown and the impact on demand growth beyond 2025 will affect this, he added.

 

The report has based its estimates on a price outlook of mid-to-low $60s per barrel for Dated Brent on a monthly average basis for the remainder of the year.

 

Global demand falling

 

In its first update since Trump's sweeping tariff announcements on April 2, S&P now expects global oil demand growth to average 750,000 b/d in 2025, a downward revision of 500,000 b/d from the prior outlook. This reverses strong oil demand growth in the first three months of 2025 when demand grew by an estimated 1.75 million b/d year-on-year. In contrast, demand growth for the remaining quarters of the year is now expected to average just 420,000 b/d, the energy and commodity market analytics provider said.

 

“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,” Burkhard said.

 

Global crude oil supply surpluses will likely widen given the recent OPEC+ decision to accelerate the pace of production increases.