The U.S. Energy Information Administration (EIA) has issued a warning regarding the potential for lower oil demand due to ongoing tariffs and trade uncertainties. In its latest report, the EIA has revised its oil demand forecasts downward through 2026, reflecting concerns about how tariffs could impact the global economic landscape and, in turn, oil prices. The EIA also adjusted its oil price forecasts for both this year and next. This shift in projections underscores significant volatility in energy markets, which may stem from anticipated lower global economic growth alongside an increase in oil supply.
The situation has worsened following U.S. President Donald Trump’s imposition of a blanket 10% tariff on all U.S. imports, coupled with heightened duties on specific trading partners. China’s retaliatory measures included additional tariffs on U.S. imports, further escalating trade tensions. While Trump recently put a pause on country-specific duties for a period of 90 days, tariffs on imports from China have surged to 125%. Analysts are warning that this escalation in trade conflicts may lead to a slowdown in global economic activity, which could decrease oil demand significantly.
As a result, the EIA now projects that global oil and fuel demand will increase by 900,000 barrels per day (bpd) this year, reaching approximately 103.6 million bpd. This is a reduction from the previous expectation of a 1.2 million bpd growth. The following year, the EIA anticipates demand growth of about 1 million bpd, also lower than earlier forecasts. In light of weaker demand and an accelerated strategy from the OPEC+ group to increase oil supply, the EIA expects rising global crude inventories beginning mid-2025.
This change signifies a broader surplus in the oil market than previously estimated, prompting UBS analyst Giovanni Staunovo to label the report as bearish. Consequently, average global benchmark Brent crude prices are now forecasted to be significantly lower than previous estimates, reflecting the impact of these developments on the oil market.