Charles EstherThe International Energy Agency (IEA) has trimmed its global oil demand projections for 2025 and 2026.
This decision comes in response to rising trade tensions, slowing economic growth, and the steady rise of electric vehicle adoption.
Demand Growth Weakens in 2025 and 2026
According to the IEA’s latest monthly oil market report, the global oil demand for 2025 is now expected to grow by just 730,000 barrels per day (bpd).
This is a sharp downgrade from previous forecasts, marking the lowest rate of demand growth since the COVID-19 pandemic disrupted global energy markets in 2020.
Looking ahead to 2026, the IEA projects demand growth to further decline to 690,000 bpd.
This reflects a broader trend of deceleration, especially as nations move toward cleaner energy alternatives.
Impact of Trade Wars and Economic Slowdowns
A key reason for this revised outlook is the ongoing trade war between major global economies—particularly the United States and China.
Tariffs and retaliatory measures have led to reduced industrial activity, lower consumer spending, and a general slowdown in global trade.
This, in turn, has hurt the demand for oil, especially in sectors like transportation, logistics, and manufacturing that rely heavily on petroleum products.
Economic uncertainty has also played a major role.
The world’s two largest oil-consuming nations—China and the U.S.—are showing signs of weakened demand, with slower GDP growth and tightening financial conditions contributing to reduced energy consumption.
Non-OPEC Supply Still Rising
Despite waning demand growth, oil supply is not showing signs of contraction.
The IEA expects non-OPEC+ countries to increase output by 1.3 million bpd in 2025.
This could potentially result in a market surplus, further putting pressure on global oil prices.
This imbalance between supply and demand raises concerns among investors and producers, as it might lead to increased price volatility and reduced profits for oil-exporting nations.
Oil Prices React Cautiously
Following the release of the IEA report, global oil benchmarks such as Brent crude and West Texas Intermediate (WTI) experienced mild declines.
Traders and analysts are now paying close attention to upcoming economic indicators and trade negotiations that could influence future demand.
The Long-Term Shift Toward Clean Energy
Another key factor in the IEA’s forecast revision is the rising adoption of electric vehicles and cleaner energy solutions.
More countries are introducing policies that favour energy efficiency and lower-carbon transportation, reducing the long-term reliance on fossil fuels.
This structural shift is expected to continue influencing oil demand in the coming years, especially in advanced economies.
Conclusion
The IEA’s downward revision of oil demand forecasts for 2025 and 2026 highlights the growing impact of geopolitical and economic risks on the global energy market.
As trade wars and clean energy transitions reshape the demand landscape, oil producers and investors may need to brace for a period of uncertainty and adaptation.
