^{Source: Earth.Org}

OPEC Slashes Oil Demand Forecast Amid Rising Trade Tensions

The Organization of the Petroleum Exporting Countries (OPEC) has revised down its oil demand growth forecasts for 2025 and 2026, citing a notable slowdown in global economic momentum. The group attributes much of this economic drag to the Trump administration's intensifying trade policies, which have sparked fresh uncertainty across international markets.

In its latest monthly oil market report released Monday, OPEC projected oil demand would grow by 1.3 million barrels per day (bpd) in both 2025 and 2026—down by 150,000 bpd from previous estimates. This revised forecast signals growing caution within the cartel about the near-term stability of the global energy market.

Global Growth Expectations Also Pulled Back

Alongside weaker demand expectations for crude, OPEC lowered its projections for global economic growth. The organization now sees global GDP expanding at 3.0% in 2025 and 3.1% in 2026. Both figures represent a 0.1 percentage point decline from the group's earlier forecasts.

“The global economy began 2025 on a steady footing,” the report noted. “However, newly imposed trade restrictions and ongoing tariff conflicts have heightened uncertainty and clouded the near-term economic outlook.”

Tariffs Take Center Stage: A Breakdown of Trump’s Policy Impact

Much of the revised outlook stems from aggressive new tariffs imposed by President Donald Trump. As part of a renewed push for protectionist economic policy, Trump announced sweeping tariffs of up to 145% on Chinese goods, impacting the world’s second-largest economy and the largest single importer of crude oil.

In addition to China, a 10% blanket tariff has been imposed on most other trade partners during a temporary 90-day negotiation window. There are also reports of upcoming targeted tariffs on key sectors such as pharmaceuticals and semiconductors—industries vital to both global trade and technological innovation.

These policy shifts have rattled investor confidence and are already affecting oil price movements and trade flows.

OPEC+ Responds: Production Rises Despite Demand Concerns

In a somewhat counterintuitive move, members of the OPEC+ coalition—including Russia and other non-OPEC oil producers—agreed to ramp up oil production starting in May, despite the downward revision in global demand.

The move has added further volatility to the energy market. Since Trump’s announcement of the new tariff package on April 2, crude oil prices have fallen by roughly 13%, reflecting investor concerns over potential oversupply amid weakening global consumption.

On Monday, however, prices saw a modest rebound. U.S. West Texas Intermediate (WTI) and global benchmark Brent crude both rose more than 1% during intraday trading, suggesting short-term optimism or technical corrections despite longer-term headwinds.

Broader Economic Implications

According to analysts from JPMorgan and the International Energy Agency (IEA), the long-term consequences of protracted trade tensions could be even more severe. Trade policy uncertainty has already led to capital flight in emerging markets and slower industrial production in key regions like Europe and Southeast Asia.

“Energy markets don’t operate in a vacuum,” noted a recent JPMorgan report. “When economic growth stalls due to tariffs, industrial energy demand—especially for oil—suffers across sectors ranging from manufacturing to logistics.”

Moreover, China’s oil imports have already shown signs of softening in Q1 2025, with customs data revealing a 3.5% year-over-year decline. If the U.S.-China trade standoff escalates further, this downward trend could deepen, further pressuring OPEC’s member nations.

Market Faces a Delicate Balancing Act

As OPEC grapples with slower demand and uncertain geopolitical conditions, energy markets remain on edge. The Trump administration’s assertive tariff strategy may be aimed at reshaping global trade, but its ripple effects are clearly being felt across oil markets.

With production increases looming and consumption forecasts falling, the oil industry now faces a challenging few quarters where oversupply risks clashing with declining demand—raising the stakes for both exporters and consumers alike.

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