Opec trims demand forecasts but oil prices buoyed by US-Iran talks

The Organization of the Petroleum Exporting Countries (Opec) has lowered its projections for global oil demand growth in both 2025 and 2026, citing the impact of US tariffs on the global economy and crude consumption in its latest monthly report released today.

Demand Outlook Revised Downwards

Opec now forecasts oil demand to expand by 1.3 million barrels per day (bpd) in both 2025 and 2026, a downward revision from its previous estimates of 1.45 mbpd and 1.43 mbpd respectively. Despite the adjustment, the cartel remains more bullish than other institutions. The International Energy Agency (IEA) projects growth of 1.03 mbpd for 2025, while the US Energy Information Administration (EIA) has cut its forecast to 900,000 bpd. Goldman Sachs anticipates even more modest growth of just 500,000 bpd. The downward revisions reflect a dimmer outlook for economic expansion in key economies amid ongoing trade tensions, which threaten to curtail global trade flows and fuel uncertainty, potentially dampening corporate investment.

Opec Output Declines

Opec's crude oil production fell by 78,000 bpd in March to 26.78 million bpd. Output from the broader Opec+ group, which includes allies, also edged down by 37,000 bpd to 41.02 million bpd. However, adherence to production quotas remains a challenge for some members, with Kazakhstan notably increasing its output by 37,000 bpd to 1.852 million bpd, significantly above its agreed limit. It is worth recalling that Opec+ is slated to increase production by 138,000 bpd in April and a further 400,000 bpd in May.

Market Reaction and Geopolitical Factors

Oil market sentiment has been largely negative recently, particularly following the decision by Opec and its allies to boost output. Brent crude futures have retreated to around $65 a barrel, with WTI trading near $62 a barrel. The unexpected scale of the planned May production increase further weighed on prices, stoking concerns of a supply glut.

Analysts suggest Opec may be using the price downturn to pressure non-compliant producers into adhering to agreed output levels. However, the lingering impact of US tariffs on the global economy continues to inject uncertainty into the energy market.

Conversely, oil prices are witnessing a rebound today, primarily driven by improved market sentiment following further indications of tariff exemptions from Washington. Intriguingly, crude prices have defied the potentially bearish implications of positive developments in talks between the US and Iran regarding a nuclear agreement. On the other hand, the nuclear agreement may mean lower risk in the region and focus on economics rather than political issues. 

Oil is attempting to extend its recovery, although some earlier gains have been pared back. Brent crude is once again trading below $50 a barrel.

Source: xStation5