IEA slashes 2025 oil demand forecast as trade tensions escalate

With escalating trade tensions significantly impacting the global economic outlook, the International Energy Agency (IEA) is forecasting a dramatic fall in oil demand.

In its latest Oil Market Report (OMR) published on 15 April, the IEA has downgraded world oil demand growth for 2025 by 300,000 barrels per day (b/d) since the previous month’s report to 730,000b/d.

This latest downgrade comes on the heels of robust oil consumption in the first quarter of 2025, which was up by 1.2 million b/d year-on-year, the strongest rate since 2023.

Negative economic impact

The IEA said the recent escalation of trade tensions had negatively impacted the economic outlook.

“After a period of relative calm, global oil markets were roiled by a barrage of trade tariff announcements in early April,” the IEA reported.

“Benchmark crude oil prices plunged to their lowest levels in four years on a sharp escalation in trade tensions and the prospect of higher supplies from some OPEC+ countries.”

The ‘Trump effect’

While imports of oil, gas and refined products were given exemptions from the tariffs announced by the US, concerns that the measures could stoke inflation, slow economic growth and intensify trade disputes weighed on oil prices.

The IEA noted that Brent futures tumbled by more than $23 per barrel to below $94/bbl after the tariffs first hit, but subsequently recovered to around $102/bbl after the implementation of some of the tariffs was postponed.

The decision by some OPEC+ members to accelerate the unwinding of extra voluntary production cuts added to the bearish momentum.

Bumpy ride ahead

“With arduous trade negotiations expected to take place during the coming 90-day reprieve on tariffs and possibly beyond, oil markets are in for a bumpy ride and considerable uncertainties hang over our forecasts for this year and next,” the IEA noted.

“Global oil demand growth prospects are rapidly shrinking as drastic trade tariffs threaten to hit consumption in the US and China.”

“Responding to a paradigm shift in the global economy, the IEA now sees world oil demand growing by […] roughly two-thirds of its previous forecast, to reach 103.5 million b/d.”