US EIA warns of lower oil demand from tariffs and trade uncertainty

By Shariq Khan

NEW YORK, April 10 (Reuters) - Tariffs are clouding the global economic outlook and could weigh heavily on oil prices in the months ahead, the U.S. Energy Information Administration (EIA) said on Thursday as it lowered its oil demand forecasts through 2026.

The U.S. Department of Energy's statistical arm also cut its oil price forecasts for this year and next, highlighting significant uncertainty in energy markets from potentially lower global economic growth and higher oil supply.

Benchmark crude oil futures have plummeted to pandemic lows since U.S. President Donald Trump last week announced a blanket 10% tariff on all U.S. imports and sharply higher duties on dozens of trading partners. In response, China last Thursday slapped additional import levies on imports from the United States.

While Trump on Wednesday paused the country-specific duties for 90 days, tariffs on imports from China were hiked to 125%. The 10% tariff on imports from all countries is also being implemented.

Analysts have said that escalating trade wars could slow global economic activity and dent oil demand.

The EIA said it now expects global oil and fuel demand to grow by 900,000-barrels-per-day (bpd) from last year to around 103.6 million bpd this year. It previously expected growth of 1.2 million bpd this year.

For next year, the EIA now expects demand growth of around 1 million bpd, down from its previous forecast of 1.2 million bpd.

Combined with weaker demand, an acceleration of the OPEC+ group's plans to boost oil supply is set to raise global crude inventories starting mid-2025, the EIA said. That is sooner than the agency had previously anticipated, and oil markets will be in a wider surplus this year compared to earlier estimates, the EIA said.

The larger market surpluses made this a bearish report, UBS analyst Giovanni Staunovo said.

EIA now expects global benchmark Brent crude prices to average around $67.87 per barrel in 2025, a sharp cut from its previous forecast of $74.22. Next year, the agency expects Brent to average $61.48, down from its earlier expectation of $68.47.

U.S. crude prices are now expected to average $63.88 per barrel in 2025 and $57.48 in 2026. That compares to prior forecasts of $70.68 for this year and $64.97 next year.