01:00 PM EDT, 04/15/2025 (MT Newswires) -- The International Energy Agency on Tuesday reduced its projections for global oil demand growth in 2025, as rising trade tensions weigh on economic prospects.

The agency now expects an oil demand increase of 730,000 barrels a day this year, down by 300,000 barrels from its previous estimate. "Escalating trade tensions have negatively impacted the economic outlook," the IEA said in its latest monthly report.

On Monday, the Organization of the Petroleum Exporting Countries lowered its global oil demand projections for 2025 and 2026 amid macroeconomic uncertainties tied to the US government's tariffs.

After announcing sweeping new tariffs on US imports earlier this month, President Donald Trump declared a 90-day pause on certain levies for non-retaliating countries. China responded with its own retaliatory duties, and Washington and Beijing have since raised tariffs on each other's goods.

Benchmark crude oil prices recently dropped to their lowest level in four years amid the ongoing tariff war between the US and China, according to the IEA.

The fall in oil prices was also driven by the recent decision of eight members of the OPEC and its allies to increase production in May faster than expected, the IEA said. However, the actual rise may be much smaller, as Kazakhstan, the United Arab Emirates and certain other members of the cartel are already producing "well above" their targets, according to the report.

"While imports of oil, gas and refined products were given exemptions from the tariffs announced by the (US), concerns that the measures could stoke inflation, slow economic growth and intensify trade disputes weighed on oil prices," the IEA said. "With negotiations and countermeasures still ongoing, the situation is fluid and substantial risks remain."

West Texas Intermediate crude was down 0.5% at $61.22 a barrel in Tuesday afternoon trade, while Brent declined 0.4% to $64. Both WTI and Brent posted losses in the last two weeks.

The IEA lowered its global supply growth outlook by 260,000 barrels per day to 1.2 million barrels for 2025 due to a drop in US and Venezuelan output.

Oil demand growth is anticipated to slow down further to 690,000 barrels per day in 2026 amid the "fragile" macroeconomic backdrop and as electric vehicles take up a larger share, the agency said. Production is expected to rise by 960,000 barrels per day next year, with offshore projects "taking the lead," according to the report.

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