IEA warns that trade tensions are complicating oil demand projections
The International Energy Agency (IEA) has recently revised its global oil demand growth forecast for 2025 due to worsening macroeconomic conditions caused by escalating trade tensions. In its latest Oil Market Report (OMR), the IEA predicts that oil demand will increase by 1.03mn b/d to 103.91mn b/d in 2025, down from its previous projection of a 1.10mn b/d rise. Recent data on oil demand has been disappointing, leading the IEA to reduce its growth estimates for the final quarter of 2024 and the initial months of 2025.
Following the imposition of tariffs by US President Donald Trump on Chinese, Mexican, and Canadian goods, as well as steel and aluminum imports, several countries retaliated with tariffs on US imports. This has heightened the risk of a full-scale trade war. The IEA expressed concerns about the impact of US tariffs on Canada and Mexico, which accounted for approximately 70% of US crude oil imports last year. However, the full repercussions of these trade policies on the broader oil market are still uncertain, given the ongoing negotiations and unclear scope of tariffs.
Despite the trade tensions, the IEA expects slight growth in US oil demand this year, projecting a consumption increase of 90,000 b/d to 20.40mn b/d, up from its previous estimate of a 70,000 b/d rise. The downward revisions to the global oil demand forecast were primarily driven by lower growth expectations in India and South Korea. Additionally, the agency mentioned that despite the recent US sanctions on Russia and Iran, there has been limited disruption to loadings, although some buyers have reduced their purchases.
According to the IEA’s latest projections, global oil supply is anticipated to surpass demand by 600,000 b/d in 2025, compared to the previous estimate of 450,000 b/d. This surplus could further increase to 1mn b/d if OPEC+ members continue to boost production beyond April. Earlier in the month, eight OPEC+ alliance members agreed to a plan to gradually unwind voluntary production cuts of 2.2mn b/d over an 18-month period starting in April.
The IEA’s report highlights the potential consequences of the ongoing trade tensions, noting that geopolitical factors and policy decisions could significantly impact the oil market in the coming years. As uncertainties persist regarding the extent of trade conflicts and production decisions by major oil-producing nations, the IEA remains vigilant in monitoring the global oil market dynamics to provide accurate and timely assessments.
