A growing U.S.-China trade spat could hurt oil demand growth this year and next if the global economy takes a hit, the International Energy Agency (IEA) warned on Aug. 10.

Beijing this week responded to threats by the Trump administration by announcing plans to hit $16 billion worth of U.S. goods with a 25% tariff—from bicycles and medical equipment to coal and diesel.

“Trade tensions might escalate and lead to slower economic growth, and in turn lower oil demand,” the energy group said in its monthly market outlook.

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Oil watchers are keeping an eye on how this might hit the market for bunker fuel used for container ships and diesel for trucks that transport goods globally.

Although the IEA did not lower its annual oil demand expectations in this report, it said: “growth could cool down later this year and into 2019.”

The Paris-based group said this could “dampen” the price impact of new U.S. sanctions on Iran’s oil industry, which are expected to curb supply from the country from November.

The IEA still said, however, renewed U.S. sanctions on Iran remain a major risk to global supplies. Saudi Arabia and Russia have been raising oil output in advance of November but this has raised fears global spare capacity is at very low levels.

“Maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion,” the IEA said.

So far, though, prices have eased since OPEC and Russia started raising production.

Brent crude, the international benchmark, has fallen from around the $80 a barrel mark to near $70 in recent months. “This cooling down in prices is clearly welcome for consumers,” the IEA said.

The IEA reported that OPEC crude oil output was steady in July at 32.1 million barrels per day (bbl/d) as an “unexpected decline” in Saudi Arabian supply was offset by higher production from the United Arab Emirates, Kuwait and Nigeria.

The IEA said Saudi Arabia’s production was just below 10.4 million bbl/d, a fall from June and in line with lower numbers circulated by Saudi officials in the market.

But there are mounting concerns about the accuracy of these figures, with some energy analysts saying production is higher at levels more than 10.6 million bbl/d, with the briefing seemingly intended to stem any further price falls.

“The Saudis have lost the trust of market,” said Amrita Sen at Energy Aspects in a note earlier this week. “There has been a complete failure in messaging on the part of the Kingdom.”

The IEA expects oil demand to grow by 1.4 million bbl/d this year and 1.5 million bbl/d in 2019.

Production from outside the cartel, led by the U.S., is expected to average 59.9 million bbl/d in 2018 and 61.8 million bbl/d in 2019.

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