Global oil demand growth for 2025 has been downgraded by the International Energy Agency (IEA), due to a deteriorating trade climate spurred by new US-imposed tariffs. In its monthly report released Tuesday, the agency stated that global consumption is now expected to rise by 730,000 barrels per day, down by 300,000 barrels from its March forecast. The downward trend is also projected to continue in 2026, with growth slowing to 690,000 barrels per day.
A trade backdrop with immediate effects
The escalation of trade tensions, initiated in early April through a wave of US tariff measures, has sent shockwaves through oil markets, which had previously been relatively stable. While crude oil, natural gas and refined product imports have been exempted from the new tariffs, fears that the measures would spur inflation and slow economic growth have impacted prices. Oil prices dropped to their lowest levels in four years, with Brent futures falling below $60 per barrel, before rebounding to around $65 following the delayed implementation of some duties.
US shale oil under pressure
This price correction has had a direct impact on the profitability of shale oil production in the United States, according to the Dallas Federal Reserve’s energy survey cited by the IEA. The break-even threshold for drilling new light tight oil wells is estimated at $65 per barrel on average, putting many operations at risk. Tariffs could also raise the cost of essential materials and equipment, particularly steel, further discouraging drilling activity.
Contrasting momentum in the first quarter
Despite the downward revisions, global oil consumption saw notable growth in the first quarter of 2025, increasing by 1.2 million barrels per day year-on-year, marking the highest rate since 2023. This performance, however, was not enough to offset current macroeconomic uncertainties. The IEA’s projections are aligned with those of the Organization of the Petroleum Exporting Countries (OPEC), which also revised its oil demand growth forecast downwards in its monthly report published Monday.
