India's Oil Consumption Hit by Rising Trade Tensions: Here's Why

Oil consumption in India, China, Indonesia and Vietnam is expected to be adversely affected by the economic fallout from rising trade tensions, according to Commodity Market Outlook published by the World Bank on April 29.

The report also stated that oil consumption is expected to rise globally by only 0.7 million barrels per day in both 2025 and 2026, which is about half the average annual increase in 2015-19.

This reflects an expected global economic slowdown, in addition to the continued decline in the oil intensity of global economic activity, said the World Bank.

Economic Slowdown and Global Forecasts

The World Bank also forecast Brent crude oil price (annual average) fall from $81/bbl in 2024 to $64/bbl in 2025 and $60/bbl in 2026. The forecast has been attributed to a sharper slowdown in global economic growth amidst rising trade tensions and uncertainty.

"Higher commodity prices have been a boon for many developing economies, two-thirds of which are commodity exporters," Indermit Gill, World Bank Group's chief economist and senior vice president for development economics told ET.

"But we're now seeing the highest price volatility in more than 50 years. The combination of high price volatility and low prices spells trouble," he added.

Global commodity prices are set to fall by 12% in 2025 and by a further 5% in 2026. ET further highlighted that the prices will remain higher than pre-pandemic levels, but when adjusted for inflation, they are likely to dip below the average seen between 2015 and 2019, according to the report titled 'Commodity Markets Outlook'.

Looking ahead, global coal consumption is projected to rise slightly in 2025 and 2026, primarily driven by India, the World Bank noted. The report further added that India is the only country among the major producers, where output is expected to increase, supported by government policy.

India’s consumption declined by one third to 70 million metric tonnes in 2024. While production increased by about 80 million metric tonnes. Meanwhile, global coal consumption continued to rise in 2024 to a new all-time high of almost 8,800 million metric tonnes. However, growth slowed to about 80 mmt in 2024, less than a third of the increase recorded over the previous two years.