Analysts are expressing growing concerns about the oil markets due to escalating trade tensions and an ongoing oversupply situation.
Goldman Sachs has issued a stark warning about significant oversupply, projecting excesses of 800,000 barrels per day (bpd) for 2025 and 1.4 million bpd for 2026, which could drive prices down. In the event of a global economic downturn or if OPEC+ reverses its voluntary cuts of 2.2 million bpd, Brent crude prices could potentially nosedive to around $40 by 2026, and even sink below that level if circumstances worsen.
Both the International Energy Agency (IEA) and OPEC have drastically adjusted their forecasts for global oil demand growth for 2025, attributing the revisions to rising trade disputes, particularly between the United States and China.
This announcement from the IEA, made public on Tuesday, highlights a deteriorating outlook for the oil sector as trade tariffs enacted by U.S. President Donald Trump ripple through the global economy.
With the IEA’s updated projections, alongside declining oil prices and negative predictions from Goldman Sachs, the outlook for the energy industry appears bleak. The IEA now estimates that global oil demand will rise by merely 730,000 bpd in 2025, reduced from an earlier projection of 1.03 million bpd.
On Tuesday, Brent crude futures dropped 11 cents, or 0.2%, settling at $64.77 per barrel at 1434 GMT, while West Texas Intermediate (WTI) crude also fell by 12 cents, or 0.2%, to $61.41, as reported by Reuters.
The IEA stated, “The worsening outlook for the global economy, coupled with the abrupt increase in trade tensions earlier this month, has led us to revise our oil demand growth forecasts downwards.” The U.S. and China are credited with contributing significantly to this downward adjustment, while trade-dependent Asian economies face much of the residual impact. This development indicates that Trump’s tariffs, which have already pressured oil prices downward recently, are dampening demand.
In its monthly report, OPEC mirrored these concerns, reducing its global oil demand growth predictions by 150,000 bpd for both 2025 and 2026. The organization now anticipates demand to increase by 1.3 million bpd in 2025 and 1.28 million bpd in 2026. Furthermore, OPEC has downgraded its global economic growth expectations for 2025 to 3.0% from 3.1%, and to 3.1% for 2026, down from 3.2%.
OPEC commented, “While the global economy showed promising growth trends at the start of the year, the recent dynamics related to tariffs have introduced considerable uncertainty regarding near-term projections.”
These downgrades arrive as oil prices continue to decline under increasing economic strain. Brent crude was trading around $64.72 per barrel early Monday, while WTI was at $61.44.
Goldman Sachs indicated in a Reuters report that oil prices could decrease further, predicting that Brent could average $63 per barrel for the remainder of 2025 and $58 in 2026, with WTI averaging $59 and $55 respectively. The bank highlighted a rising recession risk and heightened supplies from OPEC+ countries as factors contributing to potential market flooding.
Market analysts remarked that the reports from the IEA, OPEC, and Goldman Sachs emphasize the vulnerability of the global oil market as trade conflicts undermine confidence. “With economic growth faltering and supply expected to surpass demand, the energy sector faces significant challenges ahead. Policymakers and industry leaders will need to approach these issues wisely to stabilize markets in the future.”
Goldman Sachs also revised its global oil demand growth forecast for the fourth quarter of 2026 downward by 900,000 bpd since mid-March, a shift driven by the escalating U.S.-China trade conflict. For the period between the end of 2024 and 2025, oil demand is now anticipated to increase by a mere 300,000 bpd, reflecting the detrimental impact of the trade war on economic activity. Additionally, the bank reduced its forecast for U.S. shale supply during the same timeframe by 500,000 bpd, indicating a decline in domestic production.
The trade conflict escalated further last week when China imposed tariffs on U.S. imports of 125% on April 11, responding to Trump’s decision to raise duties on Chinese products. These reciprocal actions could disrupt global supply chains, amplifying volatility in energy markets.