Tariffs Could Reduce Global Oil Demand, OPEC Says

Tariffs could play a major role in global energy markets over the coming year.

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at the headquarters building in Vienna. Alexander Klein/AFP via Getty Images

Crude oil prices tumbled after the Organization of the Petroleum Exporting Countries (OPEC) reduced its global oil demand forecasts for 2025 and 2026, citing the effects of U.S. tariffs.

According to OPEC’s latest Monthly Oil Market Report, released on April 14, international consumption will increase by 1.3 million barrels per day (bpd) this year, down from last month’s estimate of 1.45 million bpd. Next year, OPEC expects demand to be 1.28 million bpd, down from the March projection of 1.43 million bpd.

The report states that world oil demand will total 105.05 million bpd in 2025 and 106.33 million bpd in 2026.

OPEC also trimmed this year’s world economic growth estimate to 3 percent from 3.1 percent and lowered next year’s to 3.1 percent from 3.2 percent.

“The global economy showed a steady growth trend at the beginning of the year, however, the near-term trajectory is now subject to higher uncertainty given the recent tariff-related dynamics,” the report reads.

Oil prices have plummeted this year. West Texas Intermediate (WTI), the U.S. benchmark for crude prices, has declined by 15 percent, and Brent, the worldwide benchmark, has dropped by 14 percent.

OPEC and its allies, OPEC+, recently applied pressure on oil prices after they unveiled plans to bolster production. The current plan shows that the group will gradually add 2.2 million bpd of additional supply back to global markets from April 2025 to September 2026.

President Donald Trump’s global tariffs announced on April 2 also fueled the decline in international energy markets. WTI prices fell to as low as $56 per barrel in intraday trading, before paring some losses. Investors worry that tariffs could facilitate a slowdown in the global economy, which would weigh on demand.

Oil has stabilized since the president implemented 10 percent tariffs on most countries during a 90-day pause of higher levies to permit trade negotiations. However, this could change as the administration also imposed 145 percent tariffs on China, the world’s largest petroleum importer and the second-largest economy.

The demand picture is uncertain, according to Warren Patterson, head of commodities at ING.

“Demand estimates have been trimmed as we have moved through the first quarter, and the announcement of reciprocal tariffs means that further potential revisions lower in demand are likely, given the impact that tariff escalation will have on global growth,” Patterson said in an April 4 research note.

“For now, we assume that oil demand grows by 1 million bpd with risks skewed to the downside.”

ING revised its 2025 average Brent forecast slightly lower, to $72 per barrel from $74. The Energy Information Administration (EIA), writing in its recent Short-Term Energy Outlook report, anticipates Brent crude oil to average $68 per barrel this year. S&P Global also cut its oil price forecast for 2025 by $5, to $60 per barrel.

Slippery Oil Road Ahead?

With crude oil prices potentially heading lower, market watchers are raising output alarm bells.

“Even though we love that oil prices came down reducing gasoline prices and inflation, we still must be concerned that the amount of the drop could cause some U.S. shale oil production,” Phil Flynn, an energy strategist at The PRICE Futures Group, said in a daily note.

Production volumes have been stable so far. For the week that ended on April 4, domestic output was 13.458 million bpd, up from 13.1 million bpd last year.

According to the Federal Reserve Bank of Dallas, the average breakeven price for profitable drilling ranges between $61 to $70 per barrel.

Beachgoers enjoy the ocean in view of oil shipment and production vessels in Huntington Beach, Calif., on Sept. 12, 2024. John Fredricks/The Epoch Times

The Dallas Fed’s March 2025 Energy Survey of exploration and production (E&P) firms and oilfield services companies suggests that average prices could be $74 per barrel in 2027 and $82 in 2030.

Respondents say that geopolitical risks and economic uncertainty are challenges for oil companies to navigate.

“Oil prices have decreased while operating costs have continued to increase,” one industry executive said in the report. “To stimulate new activity, oil prices need to be in the $75–80 per barrel range.”

In a note emailed to The Epoch Times, Simon Wong, an analyst at Gabelli Funds, said he does not expect drastic industry changes if U.S. crude oil prices fall below $60 and rebound.

“We need to wait and see what happens over the next quarter or two,” Wong said.

“However, if WTI falls below $60 and stays there for two consecutive quarters, I would expect U.S. E&P producers to start lower capital expenditures and defer production. U.S. production will still likely grow at or around $60, stay flat around $58–60, but start declining under $55.”

WTI crude oil prices slipped nearly 0.5 percent, to about $62 per barrel on the New York Mercantile Exchange on April 14. Brent crude slid approximately 0.2 percent, to below $65 per barrel, on London’s ICE Futures exchange.

Gasoline prices have been sliding over the past week, falling below $3.19 per gallon on April 14, according to the American Automobile Association. Natural gas prices have tanked more than 15 percent over the past month, although they remain up by 8 percent year to date. Heating oil prices are still above $2 per gallon.