Oil Market Report – May 2025: A Deep Dive into Current Trends
As we step into May 2025, the oil market remains a dynamic battlefield, shaped by emerging geopolitical tensions and production adjustments. Our analysis highlights the crucial shifts influencing oil prices, demand forecasts, and production levels that every stakeholder must consider.
Recent Price Trends: Declines and Recoveries
In late April and early May, oil prices resumed their downward trajectory, exacerbated by rising trade tensions that have sent ripples through financial and commodity markets. Notably, OPEC+ has made a strategic decision to unwind production cuts further, contributing to the overall bearish outlook.
However, the narrative took a turn on May 8 when the United States clinched a trade deal with the United Kingdom, followed shortly by a 90-day accord with China on May 12. This temporary respite slightly eased the market’s anxiety, albeit the pervasive uncertainties still loom large, likely affecting the global economy and, by extension, oil demand.
Brent crude oil futures, which plunged by $14 per barrel in April to reach a four-year low of just above $60 per barrel, saw a rebound to approximately $66 per barrel as of this writing. This volatility underscores the need for close monitoring of market sentiments.
Demand Forecasts: Emerging Trends
Significant signs hint at a slowdown in global oil demand growth. Following a relatively strong first quarter in 2025, we observe weaker-than-expected delivery data from non-OECD countries, especially China and India. The revised growth rate is now set at a more subdued 650,000 barrels per day (kb/d) for the remainder of 2025.
Despite the recent downturn, emerging economies continue to be the driving force behind demand, contributing an estimated 860,000 kb/d this year and 1 million kb/d the next. In stark contrast, OECD countries are projected to see a sharp decline, with estimates of -120 kb/d and -240 kb/d, respectively.
OPEC+ Adjustments: A Surprising Turn
In early May, OPEC+ surprised industry observers with a decision to implement another monthly production increase of 411 kb/d for June—a move that essentially accelerates production to levels initially planned for October 2025. However, it’s crucial to note that the actual gain may be tempered, as several countries such as Kazakhstan, the UAE, Iraq, and Russia are already producing above their agreed targets. The interplay of constraints and compensatory cuts for previous overproduction will limit nominal increases.
With new supply targets established for June, OPEC+ is on track to add 310 kb/d this year and 150 kb/d in 2026. However, tightened sanctions on Venezuela, Iran, and Russia might counterbalance some of these boosts.
Impact on U.S. Shale Production: Adjusting the Course
The latest slump in oil prices is set to impact U.S. shale production significantly. During recent earnings calls, independent producers disclosed plans to reduce rig counts and lower their capital expenditure guidance by as much as 9% for 2025. Consequently, we have adjusted our forecast for U.S. light tight oil production downward for the second consecutive month, forecasting a dip of 40 kb/d in 2025 and 190 kb/d in 2026.
The updated assessment indicates that U.S. total supply growth will now reach 440 kb/d and 180 kb/d, respectively, aiming for 20.9 mb/d in 2026. As U.S. tight oil growth slows, conventional projects are expected to support non-OPEC+ supply increases of 1.3 mb/d this year and 820 kb/d in 2026.
Future Outlook: Supply vs. Demand
With an imbalance between supply and demand on the horizon, oil inventories are projected to surge by an average of 720 kb/d this year and 930 kb/d next year, marking a significant shift from a decline of 140 kb/d in 2024. This influx sets the stage for a necessary rebalancing of fundamental supply and demand dynamics.
Conclusion: Keeping a Close Eye
The oil market is navigating complex and evolving terrains shaped by geopolitical factors and production decisions. Stakeholders must remain vigilant, analyzing shifts in market sentiment and adjusting strategies accordingly. Whether you’re involved in trading, production, or investment, understanding these trends is crucial for making informed decisions in the ever-changing oil landscape.
For further insights on oil market dynamics, explore resources such as IEA or EIA.
