The International Energy Agency (IEA) has released an updated forecast indicating a marked deceleration in global oil demand for the current year, driven primarily by the repercussions of US tariffs on international trade dynamics.

Revised Demand Projections

In this forecast, the IEA has dramatically reduced its anticipated oil demand growth from 1.03 million barrels per day (b/d) to 730,000 b/d, representing a nearly 33% decrease. This revision underscores the potential for further downward adjustments as the implications of the tariff strategy initiated by the US evolve.

Impact of US Tariffs

Although exemptions have been granted for imports of oil, gas, and refined products from the tariffs implemented by the US, the broader economic concerns—including inflation, stagnation of economic growth, and intensifying trade disputes—have begun to exert downward pressure on oil prices. According to the IEA, “With negotiations and countermeasures still ongoing, the situation is fluid and substantial risks remain.”

Market Reactions and Price Fluctuations

Oil prices have experienced noticeable fluctuations in recent weeks. Brent crude, the global benchmark, fell below $60 a barrel for the first time in approximately four years, as traders grappled with recessionary fears. However, following President Trump’s decision to temporarily pause some tariffs for 90 days to facilitate negotiations, prices rebounded slightly to $67.84 a barrel by Tuesday morning in London.

Future Growth Expectations

Looking ahead, the IEA anticipates that annual demand growth may further decline next year to 690,000 b/d. This forecast adjustment comes as lower oil prices are predicted to only partially compensate for the anticipated economic downturn.

Supply Dynamics and OPEC+ Responses

A key factor contributing to the recent downward trend in oil prices has been the unexpected decision from eight OPEC+ members, including Saudi Arabia, to accelerate output from the following month. While these countries plan to increase production by 411,000 b/d, the IEA notes that the actual impact on supply is likely to be “much smaller,” as several member nations—including Kazakhstan, the United Arab Emirates, and Iraq—are already exceeding their production targets.

Conclusion

The evolving landscape of global oil demand and supply dynamics, heavily influenced by trade negotiations and tariff implications, continues to be complex and uncertain. Stakeholders in the oil market will need to navigate these challenges vigilantly as new developments unfold.