LONDON, April 15 (Reuters) – The International Energy Agency (IEA) has revised its global oil demand forecast for 2025, predicting the slowest growth rate in five years. This comes as U.S. production growth is also expected to slow down, largely due to tariffs imposed by U.S. President Donald Trump and retaliatory actions by other countries.
According to the IEA, the combination of Trump’s tariffs and a planned increase in supply by OPEC+ producers has led to a sharp drop in oil prices this month. This decline has reduced revenue for oil producers, and the IEA warns that U.S. oil activity might actually slow down despite Trump’s push for increased drilling.
In its latest monthly report, the IEA said global oil demand would increase by just 730,000 barrels per day (bpd) this year, a sharp reduction from the previous month’s forecast of 1.03 million bpd. This downgrade was driven by trade tensions, particularly a sudden escalation in early April, which affected the global economic outlook. The IEA noted that half of the revised demand reduction is expected from the U.S. and China, with the remainder coming from trade-focused Asian economies. This growth rate would be the lowest since 2020 when the COVID-19 pandemic caused a contraction in demand. Excluding the pandemic, it would be the lowest since 2019, when demand growth was 540,000 bpd.
Looking ahead to 2026, the IEA forecasts further slowing in demand growth, down to 690,000 bpd, due to the fragile economic situation and the rise of electric vehicles (EVs). In China, the world’s second-largest oil consumer, economic challenges and increased EV adoption are dampening oil consumption growth, which had previously driven significant increases in demand.
Global oil prices have dropped by 13% this month, hovering around $64 a barrel. This drop is linked to trade tensions and OPEC+’s decision to boost supply in May. As oil prices fall, governments in oil-dependent countries are facing pressure to address the revenue shortfall, with some considering issuing more debt and reducing spending.
The price drop is also challenging U.S. shale producers, who have helped make the U.S. the world’s largest oil producer. The IEA highlighted that the sharp decline in oil prices has shaken the U.S. shale sector, while new tariffs may increase the cost of steel and equipment, further discouraging drilling activities.
The IEA also lowered its forecast for U.S. oil supply growth in 2025 by 150,000 bpd, now predicting an increase of 490,000 bpd. However, the agency noted that conventional oil projects are still on track, and it expects total supply from non-OPEC+ countries to rise by 1.3 million bpd in 2025, exceeding the expected rate of demand growth and indicating a potential surplus.
This reduction in oil demand growth mirrors a similar adjustment made by OPEC on Monday. However, the IEA’s cut is more significant. OPEC revised its demand forecast for 2025 and 2026 to 1.30 million bpd and 1.28 million bpd, respectively, down by 150,000 bpd from its earlier predictions. Unlike the IEA, OPEC expects oil demand to continue rising for years, while the IEA believes demand will peak within this decade as the world shifts toward cleaner energy sources.