By Giulia Petroni

The Organization of the Petroleum Exporting Countries trimmed its economic growth outlook but struck a cautiously optimistic tone on trade developments, keeping its oil demand forecast steady as it prepares to accelerate production.

"Trade negotiations over the past two months...have shown a potential pathway of de-escalation, supporting the assumption that major trading partners will succeed in achieving lower tariff rates," the Vienna-based cartel said.

The global economy is now expected to grow 2.9% this year, down from 3% previously, while next year's projections remain unchanged at 3.1%. The group said global uncertainty should ease if the U.S. secures deals with key trade allies, noting potential agreements with partners like the EU, Japan and South Korea could materialize in the coming months.

OPEC also cut its U.S. growth assumptions to 1.7% in 2025 and 2.1% in 2026, citing the impact of trade-related uncertainties on consumer confidence and inflation. It also said first-quarter growth was hit by a rise in imports, likely driven by front-loading ahead of anticipated tariff hikes.

The cartel still expects oil demand to rise by 1.3 million barrels a day this year and 1.28 million barrels a day the next, supported by strong air travel demand and healthy road mobility. Its forecast remains notably more upbeat than others in the industry, with the International Energy Agency currently estimating this year's growth at 726,000 barrels a day.

In afternoon trading in Europe, Brent crude, the international energy benchmark, was just shy of $66 a barrel, while the U.S. oil gauge West Texas Intermediate traded close to $63 a barrel.

Oil prices recovered from recent lows after the U.S. and China agreed to drastically roll back tariffs on each other's goods for an initial 90-day period, easing concerns of a tariff-induced recession that had previously triggered a broad selloff in risk assets.

However, uncertainty surrounding the future of trade negotiations continues to weigh on market sentiment, limiting further gains. Meanwhile, the cartel and its allies--which pump more than half of the world's crude oil--decided they will increase supply by 411,000 barrels a day for a second straight month in June, fueling prospects of a global supply glut.

In April, overall OPEC crude-oil production fell by 62,000 barrels a day to 26.71 million barrels a day. The total production of countries participating in the Declaration of Cooperation--or DoC, the cartel's formal name for OPEC+--fell by 106,000 barrels a day to 40.92 million barrels a day last month.

Output from Kazakhstan, which has repeatedly created tensions within the group by exceeding its production quotas, fell by 41,000 barrels a day to 1.82 million barrels a day last month.

OPEC also cut its forecast for supply growth from producers outside of the wider OPEC+ to 800,000 barrels a day for both 2025 and 2026, saying it expects capital spending to be lower following a decline in oil prices.

Investment for oil exploration and production in countries outside the alliance is projected to fall by around 5% this year. In 2024, spending rose by $3 billion to a total of $299 billion.

Supply growth is still expected to be driven by the U.S., Brazil, Canada and Argentina. However, the cartel said it now forecasts U.S. oil output to rise by about 300,000 barrels a day this year from previous expectations of 400,000 barrels a day.

"The potential impact on production levels of the decline in upstream E&P oil investments will constitute a challenge, despite the industry's continued focus on efficiency and productivity improvements," it said.

Write to Giulia Petroni at giulia.petroni@wsj.com.

(END) Dow Jones Newswires

May 14, 2025 08:56 ET (12:56 GMT)

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