The International Energy Agency (IEA) has projected a significant slowdown in the growth of oil demand this year, attributing this to the negative effects of U.S. tariffs on trade. This marks the IEA’s first forecast following President Donald Trump’s announcement of “liberation day.” The Paris-based agency adjusted its oil demand growth prediction downward by approximately 300,000 barrels per day (b/d), reducing the expected increase from 1.03 million barrels per day to 730,000 b/d. It warned that further downward adjustments might be necessary, contingent on the progression of the U.S. president’s tariff strategy.
About half of the anticipated decline of 300,000 b/d is expected to stem from decreased demand in the United States and China. Although the U.S. tariffs excluded imports of oil, gas, and refined products, concerns about potential inflation, slowed economic growth, and intensified trade disputes have pressured oil prices, noted the IEA. It emphasized that with ongoing negotiations and countermeasures, the situation remains fluid and poses substantial risks.
Recently, Brent crude prices dipped below $60 a barrel for the first time in four years as traders considered the potential for economic recessions. However, prices recovered to $67.57 a barrel by Tuesday morning in London after President Trump temporarily paused some of the tariffs for 90 days to allow for negotiations. Nonetheless, the escalation in trade tensions prompted the IEA to revise its economic growth assumptions, which support its forecasts.
Annual demand growth is anticipated to slow to 690,000 b/d next year, as lower oil prices only partially counterbalance the challenging economic environment, according to the IEA’s preliminary forecast for 2026. In 2024, global demand reportedly increased by about 770,000 b/d, reaching 102.8 million b/d. Moreover, unexpected production increases led by eight OPEC+ members, including Saudi Arabia, have contributed to the “downward spiral in oil prices,” though the actual impact on global supply is likely to be lower than the announced 411,000 b/d increase.
OPEC also adjusted its oil demand forecast for 2025, decreasing it by 100,000 b/d. The organization anticipates global demand to grow by 1.3 million b/d this year, averaging 105.05 million b/d, as stated in its monthly report. The reduction in prices due to weakened demand is expected to affect the U.S. shale sector significantly, since producers require average prices of at least $65 a barrel to profitably drill new shale oil wells, according to a Federal Reserve Bank of Dallas survey.
The tariffs implemented by President Trump may also heighten the cost of purchasing steel and equipment, further discouraging drilling activities in the U.S., and leading to a downward revision of expected U.S. oil production growth this year by 150,000 b/d to 490,000 b/d. Overall, global oil production is forecasted to increase by 1.2 million b/d this year, down from an earlier estimate of 1.46 million b/d, due to the anticipated slowdown in U.S. shale activities and decreased supply from Venezuela stemming from stricter U.S. sanctions.
