IEA Monthly Oil Market Report: Tariff impact appears to be lighter than expected, global oil demand growth forecast raised

On Thursday local time, the International Energy Agency (IEA) slightly raised its forecast for global oil demand growth this year, as the impact of US tariff policies on the global economy was not as severe as previously anticipated, and low oil prices also boosted demand.

The IEA currently expects global oil demand to grow by 740,000 barrels per day (bpd) in 2025, with total demand averaging 104 million bpd, up from a previous forecast of 726,000 bpd growth.

A report released by OPEC the day before showed that it expects global oil demand to increase by 1.3 million bpd in 2025. OPEC began gradually increasing production in April, and combined with Trump's tariff hikes, this led to a significant pullback in global oil prices.

During European trading hours on Thursday, WTI crude oil futures prices plunged 3.6% to $60.58 per barrel, while Brent crude fell 3.7% to $63.66 per barrel. This was due to market optimism about the prospects of a potential nuclear deal between the US and Iran, as well as a recent increase in US crude oil inventories.

Earlier this week, the world's two largest economies, China and the US, announced a trade agreement and agreed to mutually reduce tariffs, easing fears of an economic recession and driving oil prices to rebound from recent lows. However, lingering uncertainties surrounding future trade negotiations have limited further upside room.

In its monthly report, the IEA reiterated its forecast of a significant global oil supply surplus next year, expecting global oil supply to increase by 1.6 million bpd in 2025 and 970,000 bpd in 2026. In its previous report last month, the agency had forecast global oil supply growth of 120 bpd and 960,000 bpd for this year and next, respectively.

The IEA believes that supply growth from non-OPEC+ countries will be robust, with daily production expected to increase by 1.3 million bpd this year, though it is expected to rise by only 820,000 bpd next year, as US shale oil production will be impacted by low oil prices. "The decline in oil prices has prompted some shale oil producers to cut spending and activity levels, with more production cuts expected in the coming quarters," the IEA said.

OPEC+ is expected to increase daily production by 310,000 bpd in 2025 and a further 150,000 bpd in 2026. The alliance has agreed to increase oil supply by 411,000 bpd in June, accelerating the pace of supply recovery for the second consecutive month, raising concerns about potential oversupply in the coming months.

However, the IEA pointed out that only Saudi Arabia has the capacity to significantly increase production. Meanwhile, tighter US sanctions on Venezuela and Iran may reduce the scale of the supply surplus.

IEA data shows that in April, despite increased sanctions pressure, Iran's production remained strong, while Venezuela's production was hit the hardest, with daily output falling by 130,000 bpd from the previous month.