International Energy Agency (IEA) has reduced its forecast for the growth of global oil demand in 2025 due to escalating tensions on trade.
In its Oil Market Report for April, the Paris-based watchdog on energy said that while imports of gas, oil and refined products are exempt from tariffs announced in the United States by President Trump, fears about the potential impact the measure could have to stoke up inflation, slow the economy and escalate trade disputes has weighed heavily on the oil price.
Oil demand forecasts
In its report, the agency lowered their forecast of growth in demand for global oil in 2025 from 900,000 barrels a day to 730,000.
The macroeconomic backdrop is likely to change rapidly, and the risks associated with forecasts are high.
Directly preceding the downgrade was the substantial rise in oil consumption, up by more than 1.2 million barrels a day from the previous year and the highest growth rate seen since 2023.
The IEA has also stated that the global demand for oil will be reduced by 400,000 barrels a day in the remaining months of this year.
According to the agency, electric cars will have a greater share of demand in coming years.
On Monday, the Organization of Petroleum Exporting Countries made a similar decision.
OPEC reduced its estimates for the growth of global oil demand in 2025 by only 150,000 barrels a day, citing US tariffs.
According to the cartel, demand is expected to rise by 1.3 millions barrels per day in 2019.
The IEA cut was much more dramatic on Tuesday.
OPEC also has a more positive outlook on oil demand than any other forecasting industry, as they expect oil consumption to continue growing for many years.
The IEA predicted that the oil demand would peak in this decade as a result of a shift to cleaner sources of energy.
Forecasts of supply
The IEA also reduced its estimates for the growth of global oil supplies by 260,000 barrels aday to 1.2 millions barrels aday in 2025.
This decrease was due to lower production in Venezuela and the US.
The offshore oil projects will lead the increase in production of 960,000 barrels a day by 2026.
The agency reported that global oil production increased by 590,000.00 barrels per a day in March to 103.6 millions barrels.
The supply in March increased by 910,000 barrels a day compared to the same time last year. Non-OPEC+ growth was responsible for both the monthly and annual increases.
OPEC+’s May production target will rise by 411,000 barrels a week as it unwinds voluntary production cuts that totaled 2.2 millions barrels a week.
IEA stated:
The actual rise in production may, however, be smaller as many countries already produce well beyond their target, such as Kazakhstan, United Arab Emirates, and Iraq.
According to the IEA, Chevron’s Tengiz expansion project has increased Kazakh crude production by 1.8 million barrels a day. This is a new record.
Kazakhstan is now producing 390,000 more barrels per day than its OPEC+ quota.
US Production Affected
Dallas Fed Energy Survey revealed US shale oil companies need an average price of $65 per barrel to drill light-tight oil wells profitably. The sharp drop in oil prices is a concern.
The IEA stated that “new tariffs could also increase the cost of steel and drilling equipment. This would further discourage drilling.”
The IEA reported that “along with the effect of Chinese tariffs, we have revised our US oil forecast downward by 150 kb/d for this year. Growth is now estimated at 490 kb/d,” IEA stated.
According to the Energy Agency, conventional oil projects are on track and there is a forecast increase of 1.3 mb/d in non-OPEC+ supplies.
Oil markets will be in for an uphill ride this year, and our predictions for next are weakened by the uncertainty that comes with arduous negotiations on trade during the 90-day tariff reprieve.
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