Analysts predict a growing pessimism in oil markets due to escalating trade tensions and an ongoing supply surplus.
Goldman Sachs has raised concerns over a significant oversupply of oil, projecting surpluses of 800,000 barrels per day (bpd) in 2025 and 1.4 million bpd in 2026, which could lead to a decline in prices. In a dire situation—such as a worldwide economic slowdown or a reversal of Opec+’s voluntary cuts of 2.2 million bpd—Brent crude prices might fall to around $40 by 2026, potentially dropping even lower under adverse conditions.
The International Energy Agency (IEA) and Opec have sharply reduced their forecasts for global oil demand growth for 2025, attributing this to escalating trade disputes, especially between the US and China.
The IEA’s announcement this past Tuesday indicated a bleak outlook for oil markets, as trade tariffs implemented by US President Donald Trump begin to impact the global economy.
The IEA’s revised forecasts, along with falling oil prices and negative predictions from Goldman Sachs, suggest a difficult situation for the energy sector. The IEA now anticipates that global oil demand will only increase by 730,000 bpd in 2025, a significant drop from an earlier estimate of 1.03 million bpd.
On Tuesday, Brent crude futures showed a decrease of 11 cents, or 0.2 percent, bringing the price to $64.77 per barrel at 1434 GMT, while US West Texas Intermediate (WTI) crude also fell by 12 cents, or 0.2 percent, to $61.41, according to data from Reuters.
“The deteriorating global economic outlook, exacerbated by the rapid increase in trade tensions in early April, has led us to revise down our projections for oil demand growth this year,” remarked the IEA. The US and China are chiefly responsible for this reduction, with trade-reliant Asian economies facing much of the remaining effects. This is the latest indication that Trump’s tariffs, which have already pushed oil prices lower this month, are suppressing overall demand.
Opec aligned with these sentiments in its monthly report, reducing its forecast for global oil demand growth by 150,000 bpd for both 2025 and 2026. The group now estimates increases of 1.3 million bpd in 2025 and 1.28 million bpd in 2026. Additionally, Opec has revised its global economic growth forecast down to 3.0 percent for 2025, from 3.1 percent, and to 3.1 percent for 2026, down from 3.2 percent.
“The global economy demonstrated consistent growth at the start of the year; however, the short-term outlook has become considerably more uncertain due to recent tariff-related developments,” noted Opec.
The downgrades come as oil prices continue to drop amid mounting economic pressures. Brent crude futures traded at $64.72 per barrel early Monday, while West Texas Intermediate (WTI) futures were at $61.44.
Goldman Sachs, in a report referenced by Reuters, cautioned that prices could decline even further, estimating that Brent will average $63 per barrel for the remainder of 2025 and $58 in 2026, with WTI averaging $59 and $55, respectively. The bank attributes this potential decline to an increasing risk of recession and a surge in supply from Opec+ nations that may overwhelm the market.
Experts noted that the reports from the IEA, Opec, and Goldman Sachs highlight the vulnerability of the global oil market as trade tensions undermine confidence. “With economic growth faltering and supply set to surpass demand, the energy sector is likely to face a turbulent period ahead. Policymakers and industry leaders must strategically address these challenges to stabilize markets in the future,” they emphasized.
Furthermore, Goldman Sachs slashed its global demand growth forecast for the fourth quarter of 2026 by 900,000 bpd since mid-March, driven by the escalating US-China trade conflict. It now expects that oil demand will rise by just 300,000 bpd between the end of 2024 and 2025, reflecting the negative impact of the trade war on economic activity. Additionally, the bank reduced its estimate for US shale supply during the same timeframe by 500,000 bpd, indicating lower domestic production.
The trade war escalated recently when China raised tariffs on US imports to 125 percent on April 11, retaliating against the US decision to increase duties on Chinese goods. These reciprocal measures threaten to disrupt global supply chains, injecting volatility into energy markets.