Trade War and OPEC+ boosts threaten oil demand: IEA
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The news: The International Energy Agency (IEA) has said that the macroeconomic conditions that underpin oil demand have worsened over the past month due to global trade tensions, and that a larger than anticipated supply surplus could arise if OPEC+ raises output after April.
The numbers: The IEA lowered its demand-growth estimates for 4Q24 and 1Q25 to around 1.2 million barrels per day. It now estimates global demand to grow by 1.03 million barrels per day from 1.1 million barrels per day, reaching an average of 103.9 million barrels per day.
The IEA added that markets face a surplus of 600,000 barrels per day in 2025, and last week’s announcement by OPEC+ to increase output could add another 400,000 barrels per day.
The context: In its Oil Market Report for March 2025, the IEA said that the new US tariffs, combined with escalating retaliatory measures, tilted macro risks to the downside. The Paris-based agency said that tariffs act as barrier to global trade and economic growth, and that their “on-again-off-again nature” and potential for escalation causes uncertainty to soar.
The IEA added that while the actual supply boost from the gradual unwinding of OPEC+ production cuts in April may end up being less than a nominal increase, global oil supply is already on the rise. The US, Canada, Brazil and Guyana are showing strong supply growth, meaning that markets are heading for a surplus even if OPEC+ cancels its planned production increases.
The news comes as Saudi Aramco is on track to supply the lowest amount of oil to China in at least 10 months, at 34 million barrels of April-loading crude, down from 41 million in March. Reports in recent months are indicating that China's demand for oil may have passed its peak, and while China was responsible for more than 60% of global increase in overall oil demand between 2013 and 2023, it represented less than 20% of 2024’s rise, largely as a result of its slowdown in fuel use, the IEA states.
What they said: The IEA report reads: “Risks to the market outlook remain rife and uncertainties abound. Our current balances suggest global oil supply may exceed demand by around 600 kb/d this year. If OPEC+ extends the unwinding of output cuts beyond April without reining in supply from members currently overproducing versus their targets, another 400 kb/d could be added to the market. Equally, the scope and scale of tariffs remains unclear, and with trade negotiations continuing apace, it is still too early to assess the impact on the market outlook.”
The sources: IEA Oil Market Report , Wall Street Journal
