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Global oil demand is set to grow at its slowest pace in five years, while U.S. oil production growth will also decelerate, the International Energy Agency (IEA) reported. The downturn is attributed to escalating trade tensions triggered by U.S. tariffs and retaliatory moves, leading to a decline in global economic sentiment. Oil prices have dropped by 13% this month, driven further down by an accelerated supply increase from OPEC+ nations. The IEA revised its 2025 demand growth estimate to 730,000 barrels per day (bpd), a significant cut from previous forecasts. Additionally, 2026 projections are even lower due to economic uncertainty and the rise of electric vehicles, especially in key markets like China.

Key Highlights

* Oil demand growth for 2025 downgraded to 730,000 bpd.

* Global oil prices fell 13% this month to around $64 a barrel.

* U.S. oil production growth is slowing despite political pressure to boost output.

* Trade tensions and tariffs are hurting oil demand in U.S., China, and Asia.

* IEA forecasts further slowdown in 2026 due to EV adoption and weak economy.

Global oil prices are facing heavy downward pressure, falling by 13% this month to around $64 per barrel. The drop comes as escalating trade tensions, largely sparked by U.S. tariffs and retaliatory actions from other nations, create economic uncertainty. Compounding the price decline is a supply increase from OPEC+ producers, who opted to accelerate output hikes starting in May.

Supporting this performance, the International Energy Agency (IEA) sharply cut its 2025 oil demand growth forecast to 730,000 barrels per day (bpd), the lowest since the pandemic year of 2020 and, excluding that, the weakest since 2019. This is a notable downgrade from the 1.03 million bpd the IEA expected just last month. The agency cited deteriorating global economic conditions, particularly in major markets like the U.S. and China, where trade tensions have dampened demand.

The U.S. oil industry, despite presidential calls to ramp up drilling, is projected to scale back its activities amid weaker market conditions and lower prices. Similarly, in China, slowing economic momentum and the rapid rise of electric vehicles are reducing the nation’s oil demand, reversing a trend of consistent consumption growth.

Looking ahead, the IEA also issued its first estimate for 2026, predicting an even further slowdown in demand growth to 690,000 bpd. The agency cited the growing impact of clean energy transitions, particularly EV adoption, and a fragile global economic outlook.

Finally

Oil markets face growing uncertainty as trade tensions and clean energy shifts weigh on demand, signaling a challenging road ahead for both producers and investors.

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