Markets, investors, and companies need certainty. Without it, investment is deemed too risky with all its economic side effects. With the Trump presidency, certainty has been AWOL. It is inconceivable that the daily U-turns, contradictory policies, and incoherent narratives are all part of the ’strategic uncertainty’ created intentionally to gain leverage in trade talks. If that is one’s strongest tool in the arsenal to achieve trade goals and not reasoning and conviction, then any ‘beautiful’ deal will be ineffectual, lacking substance and will not be sustainable.
Take Iran, as the latest example. On Wednesday, the US Treasury Department imposed sanctions on several companies that deal in Iranian oil, predominantly selling it to China, a rather lucrative business. These sanctions form an integral part of the President’s ‘maximum pressure’ campaign on the Persian Gulf OPEC nation. Hardly 12 hours pass when Mr. Trump himself announces that a nuclear agreement, in which Iran would commit to stop making nuclear weapons and eliminate its nuclear stockpiles in return for the US lifting whatever embargo is nearing. It includes Iranian oil exports. At stake is about 2.3-2.5 mbpd of Iranian oil, as in the worst case, the current 1.5 mbpd exports could plunge to nought (after all, the pressure is maximum) but swell by roughly 1 mbpd should an enforceable agreement be reached. All the market can do is to react to these impromptu and irrational headlines as fast as possible. Thus, it is more than logical to have seen oil dropping $1.5/bbl yesterday, which was then quickly followed by comments from the Iranian Foreign Minister of ‘many opposing and contradictory positions’ from the US, as reported by Bloomberg.

The more salient source of ambiguity is trade wars and their economic impact. Some of the economic data released yesterday out of the US started to show the negative impacts of high tariffs, whilst some proved resilient. Stalling growth in US retail sales last month might be the harbinger of renewed inflationary pressure. On the other hand, an unforeseen fall in producer prices and stable initial jobless claims last week implied a solid economic backdrop. The tariff dust is far from being settled; in fact, it could be scuffed up now and again, leaving investors in the dark and reacting to headlines.

Demand Gap Narrows, Outlook is Pessimistic

Headlines, whilst they are factually correct, can be misleading. After the IEA released its latest findings on global oil supply and demand throughout 2026, the emphasis was on global oil demand growth slowing to 650,000 bpd for the balance of the current year, down from 990,000 bpd in the first quarter of 2025. It was a bearish slant. This slowdown is due to economic turbulence precipitated by trade wars across the globe, the narrative goes. Again, it is what the latest IEA report found, but perhaps the more important aspect of the monthly summary is the considerable and somewhat surprising upward revision in global oil demand forecasts, which is now seen 400,000 bpd more for the 2024-2026 period than last month. These improvements are largely, but not exclusively, the result of better-than-anticipated consumption prospects in Africa.

Supply estimates outside the OPEC+ alliance were left broadly unchanged, yet the global supply growth forecast improved by 400,000 bpd to 1.6 mbpd in 2025. The obvious reason is the OPEC+ decision to release barrels back to the market faster than planned. According to the energy watchdog of developed countries, this increase will come almost solely from Saudi Arabia, as it is the only country with substantial spare capacity. On the other hand, the IEA, which downgraded US shale output predictions, envisages further constraints in non-OPEC+ production in the foreseeable future should prices stay depressed. The message is, barring any geopolitical development, that price support is unlikely to come from the supply side of the oil equation.

Of course, what is the most salient part of the monthly updates is the actual demand for OPEC+ oil. The difference, albeit narrowed somewhat, is still material. With the first half of the year is slowly coming to an end, it makes sense to compare 1H 2025 OPEC+ call with that of 2H 2025 and draw a conclusion about what to expect for the remainder of the year. Growth is pencilled in, but the views are significantly diverging. OPEC is expecting a jump of 1.35 mbpd in the demand for the group’s oil from 1H to 2H, whilst the IEA believes that the call will only grow by 200,000 bpd. In absolute terms, the difference for the July-December period will be 2.05 mbpd in favour of OPEC, which expects the OPEC+ call average at 43.30 mbpd. It is therefore impossible to safely predict the movement in global and OECD stocks.

Notwithstanding these marked differences, there is a palpable reconciliation in predicting global oil demand. OPEC, for 2025, puts it at 105.00 bpd and the IEA at 103.90 mbpd. This cleavage of 1.1 mbpd is the slimmest for the past 15 months and is less than half of the widest discrepancy of 2.3 mbpd registered last July. Since then, the IEA has revised its global consumption figures down by a mere 100,000 bpd, and OPEC by 1.3 mbpd. One can conclude that OPEC has aligned its assessment with the IEA and not vice versa. We deduced above that no support is forthcoming from the supply side. Demand prospects appear equally bleak. Global trade exists because it is mutually beneficial to those involved. It is this status quo, which is being upended, harming every nation that relied on its trading partners in the past. An inauspicious trading or macroeconomic environment has an inevitably negative impact on oil demand and oil demand growth. Despite the perceived or agreed trade deals, barriers are still being erected, hindering prosperity and oil demand. This year’s cuts in demand estimates confirm this view. They amount to 200,000 bpd on average. The worst, the ‘Liberation Day’ madness will unlikely be repeated (wishful thinking?), but global trade will slow, effectively putting a brake on demand growth and price rallies. Geopolitics might be the source of intermittent rallies, but the broad picture implies inertia when bringing up the topic of higher oil prices.
 

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