PARIS: Global oil demand growth is set to accelerate this year but the escalating trade war launched by US President Donald Trump threatens to disrupt the market, the International Energy Agency said Thursday. The IEA noted that crude prices dropped in February and early March as concerns grew about the impact of trade tensions on the global economy and the OPEC+ cartel confirmed plans to raise production next month.

Global oil demand is expected to rise by just over one million barrels per day (bpd) in 2025, up from 830,000 bpd in 2024, according to the Paris-based agency. That would take overall demand for the year to 103.9 million bpd, with lower oil prices and demand from China fuelling demand.

But the agency, which advises developed countries on energy policy, said it lowered its estimates for the last quarter of 2024 and the first three months of this year. “New US tariffs will clearly act as barriers to global trade and economic growth in 2025,” the IEA said in its monthly oil market report.

The outlook of ample supplies despite US sanctions on major exporters Russia and Iran highlights the challenge for OPEC+, or the Organization of the Petroleum Exporting Countries plus Russia and other allies, in balancing the market. “The United States is currently producing at record highs and is forecast to be the largest source of supply growth in 2025,” the IEA, which advises industrialized countries, said in a monthly report.

“The latest round of sanctions on Russia and Iran has yet to significantly disrupt loadings, even as some buyers have scaled back purchases.” Last month, the IEA had suggested a slightly narrower surplus of around 500,000 bpd, according to Reuters calculations based on the agency’s data.

World oil demand is now expected to rise by 1.03 million bpd in 2025, the IEA said on Thursday, down 70,000 bpd from last month’s forecast, with growth driven largely by Asia and specifically China.

“Asian countries will account for almost 60 percent of gains, led by China where petrochemical feedstocks will provide the entirety of growth as demand for refined fuels reaches a plateau.”

Growing consumption of petrochemical feedstocks, the IEA added, accounts for almost all demand growth gains since the COVID-19 pandemic. Oil ticked lower after the report’s publication. Brent oil futures traded at $70.85 at 0926 GMT, compared with $71.01 at 0900 when the report was published. The report highlights the headwinds OPEC+ faces this year as growing global trade tensions could impact demand against a backdrop of robust supply growth.

OPEC+ decided earlier this month to start unwinding its most recent layer of output cuts from April. The 2025 surplus could grow by a further 400,000 bpd if OPEC+ extends its unwinding of cuts and fails to rein in overproduction, the IEA said. “The macroeconomic conditions that underpin our oil demand projections deteriorated over the past month as trade tensions escalated between the US and several other countries,” the IEA said, prompting it to revise down its demand growth estimates for the fourth quarter of 2024 and the first quarter of 2025.

In its own report on Wednesday, OPEC kept its view for 2025 oil demand growth unchanged at 1.45 million bpd, and flagged a 363,000 bpd rise in OPEC+ output in February led by Kazakhstan.

The IEA sees 2025 global supply growth doubling relative to the 2024 pace of growth, to around 1.5 million bpd, assuming OPEC+ does not unwind its cuts further beyond April. It added that OPEC+ may actually only add around 40,000 bpd of oil to the market, less than the nominal 138,000 bpd April increase, from Saudi Arabia and Algeria, because overproduction from other member states leaves no room to open taps further. Global supply gains will be almost all driven by non-OPEC growth, primarily the record US output as well as gains from Canada, Brazil and Guyana.

Proposed US tariffs on Mexican and Canadian oil could impact flows, the IEA said, however it said it was too early to assess the impact given negotiations are ongoing, as well as a lack of clarity around the scope and scale of the measures. — Agencies