The International Energy Agency has lowered its Crude Oil Product demand expectations, leading to a 13% drop in oil prices that could trigger a financial crisis for oil-producing countries. The prosperity of Shale Oil in the USA may come to an abrupt halt.
The latest report from the International Energy Agency (IEA) indicates that due to President Trump's tariffs on trade partners and the retaliatory measures taken by various countries, this year's global oil demand growth will be far below expectations, and the growth of USA crude oil production will also slow down.
Despite Trump's call for "drill, baby, drill," the reality is that trade conflicts combined with OPEC+ increasing production has already led to a sharp drop in oil prices this month, severely squeezing the profit margins of oil-producing countries.
This institution, which provides consulting services to industrialized countries, announced in its monthly report that the forecast for global oil demand growth in 2024 has been significantly revised down from last month's prediction of 1.03 million barrels per day to 0.73 million barrels per day, a decline far exceeding the adjustment made by the oil-producing country organization OPEC on Monday. "The sudden escalation of trade tensions in early April has led to a deterioration in the global economic outlook, forcing us to lower our oil demand growth forecast for this year."
The first outlook for 2026 released by this institution is even more pessimistic: affected by economic fragility and the accelerated adoption of electric vehicles, the growth rate of demand will further slow down to 0.69 million barrels per day.
This month, global oil prices have already fallen by 13% to around $64 per barrel, with the trade conflict and OPEC+ deciding to accelerate production increases creating dual pressure. Following the IEA report, crude oil prices continued to decline slightly on Tuesday.
The sharp drop in oil prices has placed immense pressure on governments reliant on oil revenues, with officials from multiple countries preparing response plans, including issuing more debt and reducing expenditures. This also poses challenges for USA shale oil producers—over the past two decades, they have driven the USA to become the world's largest oil producer.
"The sudden drop in oil prices has thrown USA shale oil regions into panic," the IEA warned, "New tariffs may increase the costs of steel and equipment procurement, further suppressing drilling activity." Combined with the impact of trade conflicts on ethane and liquefied petroleum gas, the IEA has lowered this year's forecast for USA oil supply growth by 0.15 million barrels per day to 0.49 million barrels per day.
However, the report points out that traditional oil projects are still progressing steadily, and it is expected that by 2025, the total supply from non-OPEC+ countries will increase by 1.3 million barrels per day, significantly higher than the growth rate of demand, suggesting that there may be a considerable surplus in the market. The IEA's downward revision of the demand forecast for 2025 responds to OPEC's actions this week, but the IEA, based in Paris, is clearly more pessimistic. OPEC has reduced its expectations for global oil demand growth for this year and next by 0.15 million barrels per day, to 1.3 million barrels per day and 1.28 million barrels per day respectively.
