The International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) downgraded sharply their oil demand forecasts for 2025 amid intensifying trade tensions between the U.S. and China. OPEC, while more optimistic, also revised its forecasts lower. All three organizations cited the impact of recent U.S. tariffs for the cuts.
These monthly estimates could be subject to further revision after the IMF cut its global economic growth projections to 2.8 percent in 2025 and 3 percent in 2026 — down from 3.3 percent earlier. U.S. growth is expected to slow to 1.8 percent, with emerging economies such as China taking a greater hit due to the trade fallout. In an update to its January World Economic Outlook, the IMF warned of “extremely high levels of policy uncertainty” and significant downside risks to global growth.
Read: Crude oil prices rebound to $61.20 as price drop sparks buying; oversupply concerns persist
Impact on oil prices
In its April Oil Market Report, the IEA slashed its 2025 oil demand growth forecast by 300,000 b/d, now projecting growth of just 730,000 b/d. The agency attributed the downgrade to deteriorating economic conditions driven by “escalating trade tensions.” U.S. president Donald Trump’s announcement of reciprocal tariffs on April 2, combined with a weakening dollar, financial market turbulence, and increased OPEC+ supply, have weighed heavily on oil prices and outlooks.
Brent crude dropped below $68/b on April 17, having briefly fallen under $60/b following the tariff announcement. Although prices partially recovered after Trump paused some tariffs on April 9, China was excluded and faced a steep hike to 145 percent. In response, Beijing imposed a 125 percent tariff on U.S. goods and has vowed to “fight to the end” if the trade war escalates.
The IEA estimates that half of the demand downgrade stems from weaker prospects in the U.S. and China, with trade-reliant Asian economies also affected. China, the world’s largest crude oil importer, is especially critical. The IEA noted that while the first quarter of 2025 registered strong oil demand growth of 1.2 million b/d, the overall outlook has weakened. It now expects 2026 growth of just 690,000 b/d and warned that lower prices may only partially offset the impact on demand of weaker global economic growth.
The EIA sees slightly higher overall demand in 2025 despite the steeper downward revision compared with the previous month’s forecast. It now projects 2025 demand growth at 900,000 b/d, down 400,000 b/d from March estimates. Its 2026 growth forecast was trimmed to 1 million b/d. The agency warned of “significant uncertainty” stemming from potential additional tariffs and noted that global prices could face persistent downward pressure.
The EIA also cited existing sanctions on Russia, Iran, and Venezuela, where any change in policy by Washington could upset market balances. It expects global oil inventories to build in mid-2025 as OPEC+ eases output cuts, non-OPEC supply grows, and demand softens. As a result, Brent prices are forecast to average $68/b in 2025 and $61/b in 2026 — both downward revisions from previous estimates.
Demand for oil will grow
OPEC, which is dominated by Arab Gulf oil producers, remains more bullish, expecting 2025 demand to grow by 1.3 million b/d and slightly less in 2026. In its Monthly Oil Market Report, the organization cited strong air travel, road transport, and industrial activity in non-OECD countries as key drivers of demand growth. However, it acknowledged downside risks stemming from the global trade environment.
The Vienna-based organization expects Chinese oil demand to rise by 271,000 b/d to 17 million b/d in 2025, especially from the transport and petrochemical sectors. However, it flagged growing uncertainty from the country’s trade conflict with the U.S. In contrast, the IEA lowered its forecast for Chinese demand growth in 2025 to 155,000 b/d and projected modest gains in 2026. It argued that the negative effects of the trade war will be long-lasting.
In the U.S., the IEA noted that lower oil prices may temper growth in shale oil production. It expects U.S. output to rise by 260,000 b/d in 2025 and only 110,000 b/d in 2026. It added that shale’s responsiveness to price swings has diminished in recent years, and investor caution driven by volatility could further dampen output growth. Nevertheless, the U.S. is still forecast to lead non-OPEC+ supply additions, which it sees growing by 1.3 million b/d in 2025 and 920,000 b/d in 2026.
Stocks and production outlook
The IEA now projects global oil stocks to increase by over 700,000 b/d across 2025, nearly hitting 1 million b/d in 2026. Its forecast for the “call” on OPEC+ crude — the volume needed to balance the market — is 40.8 million b/d, below both earlier estimates and OPEC’s own figure of 42.55 million b/d. Venezuela’s production outlook has dimmed further following Trump’s decision in February to revoke Chevron’s sanctions waiver.
The IEA expects production to fall from 850,000 b/d to 500,000 b/d starting in May. Sanctions on Iran and Russia also remain key swing factors for the supply side. Meanwhile, indirect nuclear talks between the U.S. and Iran continue, with tighter U.S. sanctions targeting Iranian crude shipments, mostly bound for China.
The latest production signals from OPEC+ added to the volatility. Earlier in April, the group of eight producers announced a 411,000 b/d supply increase for May as part of a decision to taper gradually voluntary cuts. This was far higher than the 138,000 b/d rise in April and took the market by surprise. The announcement, coming just a day after Trump’s tariff decision, contributed to the price slump. However, actual supply gains may be limited due to compensation cuts required of overproducing members.
A new table from the OPEC Secretariat indicates that planned compensation cuts from Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, and Oman amount to 378,000 b/d in May — effectively neutralizing the headline increase.
Yet questions remain over compliance, especially from Iraq and Kazakhstan, both of which have overproduced recently. The next OPEC meeting on June output levels is scheduled for May 5, with the Joint Ministerial Monitoring Committee convening on May 28.
Looking ahead, oil market dynamics will continue to be shaped by shifting trade policies, production adjustments, and broader macroeconomic shifts. As the IEA summarized, the coming months will be marked by “a bumpy ride” with considerable uncertainties clouding the outlook.
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