EIA: Declining oil demand to lead to lower oil, gasoline prices

Recent changess in global trade policy and oil production may result in lower global demand growth for petroleum products through 2026, according to the U.S. Energy Information Administration (EIA). The result is lower oil prices than previously forecast.

On Thursday (April 10), the EIA released the April Short-Term Energy Outlook that shows uncertainties in energy supply, demand and prices. The outlook is based on current market conditions, and in the first week of April, multiple developments affected the global market, especially oil markets.

On April 2, President Donald Trump announced a minimum 10% tariff on imports from all countries and higher tariffs on some countries. On April 4, China announced 34% tariffs on imports from the United States. Amid the tariff announcements, OPEC+ members announced April 3 that some countries will start to increase oil production in May instead of July as originally planned.

After the announcements, the international benchmark Brent crude oil spot price fell by 12% to $68 per barrel. EIA completed its forecasts on April 7, and the April outlook includes some recent changes in the energy market. Still, the agency expects continued volatility as market participants respond to developments.

“We expect that prices for crude oil and other commodities will continue to experience significant volatility as market participants assess the effects of trade policies,” the EIA noted in its report.

Following are some of the highlights in the April outlook.
• U.S. and global oil production is expected to continue rising as OPEC+ accelerates production increases and the United States exempts energy from its recently announced tariffs. Global oil inventories are projected to increase in mid-2025, but market uncertainty might lead to lower economic growth. This might contribute to less growth in demand for petroleum products than forecast. Rising supply and lower demand are expected to lead to the Brent crude oil price to fall to an average of less than $70 per barrel in 2025 and to just over $60 per barrel in 2026. The prices are about 10% lower than EIA’s March forecast and reflect more uncertainty around global oil demand growth and the potential for additional supply from OPEC+ in the coming months. Other uncertainties include existing sanctions on Russia, Iran and Venezuela, which could also affect oil prices.

• The U.S. retail price for regular-grade gasoline is expected to average about $3.10 per gallon this summer, primarily because of expected lower crude oil prices. The price would be the lowest inflation-adjusted summer average gasoline price since 2020.

• China’s tariffs on U.S. goods will have the largest effect on propane because China has been a key importer of U.S. propane. Some of the propane will likely be exported to other countries, but reduced propane export demand is likely to contribute to an increase in propane inventories on the U.S. Gulf Coast and put downward pressure on the Mt. Belvieu propane spot price.

• Natural gas inventories were 6% below the five-year average at the end of the withdrawal season because cold weather in January and February contributed to more natural gas being withdrawn from storage than average. Higher natural gas prices are expected this year, with the Henry Hub price averaging $4.30 per million British thermal units in 2025, up $2.10 per million British thermal units from 2024. The average price is expected to increase to about $4.60 per million British thermal units in 2026.