Price and Demand Forecasts Fall on Tariff Turmoil

Fuel markets are digesting a flurry of updates from global energy agencies along with geopolitical developments, especially regarding tariffs. As a result, crude oil prices opened slightly lower this morning, slipping by over $0.50/bbl. Investors are reacting to a blend of revised demand forecasts, pipeline updates, and trade policy uncertainty, all of which continue to weigh on sentiment. While the price movement is modest, it reflects broader concerns about the global economic outlook and its potential impact on fuel consumption heading into the second quarter.

Both OPEC+ and the International Energy Agency (IEA) have revised their global oil demand forecasts downward, signaling a more cautious outlook for 2025 and beyond. OPEC+ now expects demand growth to reach 1.30 Mbpd in 2025 and 1.28 Mbpd in 2026, marking a 150,000 bpd reduction for each year. The IEA's forecast was even more bearish, cutting its 2025 demand estimate by 300,000 bpd to 730,000 bpd. This shift comes despite strong first-quarter consumption, up 1.2 Mbpd year-over-year, and reflects concerns about weakening economic conditions, trade policy uncertainty, and the lingering effects of new U.S. tariffs. The IEA also reduced its 2025 supply growth forecast by 260,000 bpd due to declining output in the U.S. and Venezuela.

The evolving market environment is impacting global production strategies. U.S. shale producers, previously expanding rapidly under "drill baby drill", are now pulling back in response to falling price expectations and rising costs for imported equipment under new tariffs. The IEA has trimmed its U.S. supply growth outlook by 150,000 bpd and warned that trade restrictions on American energy exports are exacerbating the strain. Global supply, particularly from non-OPEC+ countries, is expected to grow, surpassing demand and fueling concerns of a looming surplus. As a result, financial institutions are revising Brent price forecasts downward, with many converging around the mid-$60s through 2026.

The downturn is hitting emerging market oil exporters the hardest. Nations like Angola and Nigeria are facing budgetary pressures, with Nigeria already redrafting its national budget and Angola dealing with a $200 million bond margin call. While Gulf nations have the reserves to withstand the impact better, even they may be forced to delay key economic projects. For oil-importing nations, cheaper crude offers some reprieve, but the broader economic headwinds remain a concern.

Operational updates also grabbed headlines for fuel markets. Keystone Pipeline's operator briefly removed, then confirmed, its regulatory approval to restart operations after a recent North Dakota spill. While the pipeline is back online, it must operate at no more than 80% of its pre-spill pressure, per new safety guidelines.