IEA Lowers 2025 Oil Demand Forecast Amid Trade Tensions

The International Energy Agency (IEA) has revised downward its global oil demand growth forecast for 2025, citing rising trade tensions and weaker economic conditions. According to the agency’s April Oil Market Report, global oil demand is now expected to grow by 730Mbb/d in 2025, a reduction of 300Mb/d compared to last month’s projection. Demand growth is projected to slow further to 690Mb/d in 2026. These figures follow a strong 1Q25, when demand rose by 1.2MMb/d year-over-year, the highest growth rate since 2023.

The IEA warned that the outlook remains uncertain due to macroeconomic volatility driven by the expanding trade conflict. US tariff measures and retaliatory actions from other economies have heightened market concerns, contributing to downward pressure on oil prices.

Brent futures dropped by approximately US$10/b in March and early April, falling below US$60/b at one point, their lowest level in more than four years. At the time of the report’s release, Brent was trading around US$65/b.

On the supply side, global oil production rose by 590Mb/d in March to 103.6MMb/d, an increase of 910Mb/d compared to the same period in 2024. Non-OPEC+ countries accounted for most of the monthly and annual gains. While OPEC+ plans to increase output targets by 411Mb/d in May, actual increases may fall short due to existing overproduction by some members.

IEA also adjusted its 2025 global supply growth forecast downward by 260Mb/d to 1.2MMb/d, driven by reduced output expectations in the United States and Venezuela. For 2026, supply is projected to increase by 960Mb/d, primarily from new offshore production projects.

Refinery activity is also expected to moderate. Global crude runs are forecast to average 83.2MMb/d in 2025, with projected throughput growth reduced by 230Mb/d to 340Mb/d for the year. In 2026, throughputs are set to rise to 83.6Mb/d. Refining margins varied regionally in March, with declining margins in the Atlantic Basin offset by improvements in Singapore.

Global oil inventories rose by 21.9MMb in February, reaching 7.647Bb, but remained near the bottom of the five-year range. The increase was driven by a 41.2MMb rise in crude oil, natural gas liquids and feedstocks, including 14.1MMb added to OECD onshore stocks. Oil products declined by 19.2MMb due to drawdowns in OECD countries.

Preliminary data indicates that inventories continued to build in March, led by non-OECD countries and increases in oil held on water.

For Mexico, a country that continues to depend on oil revenues to support public finances, these developments may affect export revenues and budget forecasts. The Mexican Export Blend recently fell below the government’s projected price of US$62.40/b, trading at US$59.30/b, according to Bloomberg. Each US$1 decrease in price represents a US$530 million (MXN$10.7 billion) loss in federal income, according to the Ministry of Finance.