Last week, OPEC+ announced that it would speed up the phase-out of production cuts, increasing its output target for June by 411,000 barrels per day — that’s three increments in one go. This follows a similar decision made in April, suggesting that the organization is determined to stick with this strategy despite low oil prices and concerns regarding weakening demand. The global crude oil supply is still somewhat tight, allowing OPEC+ the opportunity to ease voluntary cuts until the market reaches a surplus. Interestingly, it seems that Saudi Arabia might be trying to put some pressure on OPEC+ members like Kazakhstan and Iran.
Commodity analysts at Standard Chartered pointed out that a recent OPEC survey showed Kazakhstan’s crude oil output at 1.852 million barrels per day in March, significantly above its OPEC+ quota of 384,000 barrels per day. The country didn’t manage to meet its commitment to cut back by 38,000 barrels per day, leading to a total overproduction of 422,000 barrels. This trend might continue in the months ahead. In March, Kazakhstan’s production exceeded 240,000 barrels daily, which starkly contrasts with the other eight OPEC+ nations that collectively produced less than 612,000 barrels daily.
Meanwhile, the oil futures market is sending concerning signals. It seems that the combination of increased OPEC+ production and Trump’s tariffs might soon pose challenges for oil prices. The patterns in oil futures are displaying a peculiar “smile” shape, reminiscent of February 2020, just before oil prices dropped sharply. On Wednesday, the July Brent futures were trading at a 74-cent premium over the October contract. Yet, rapid price shifts from November indicate “contango,” which is often a sign of oversupply. Traders are predicting that Trump’s tariffs will eventually dampen oil demand, contributing to this unusual curve.
According to the latest data from the International Energy Agency (IEA), global oil inventory stood at 7.647 million barrels in February, down from 770.9 billion barrels last year and now at the low end of the five-year average.
As we look ahead, refiners are gearing up for the peak operating season in July and August. The maintenance schedules for refineries in the Atlantic Basin might boost oil demand as they ramp up operations. A BNP Paribas analyst suggested that summer should help support this trend.
The IEA anticipates a rise in global oil demand of 1.3 million barrels per day in the third quarter of this year, up from an average of 104.51 million barrels per day in the second quarter. The increase of 1 million barrels per day reported by OPEC+ so far, along with an additional boost of 400,000 barrels per day in July, aligns with the expected demand growth, which means the oil market is unlikely to experience a surplus until later in the year.
Oil prices shot up during Thursday’s session after the Trump administration announced a trade agreement with the UK. Brent crude oil for July delivery rose by 2.7%, reaching $62.75 per barrel, while the WTI contract for June increased by 3% to $59.86 per barrel. However, the specifics of this deal may not fully align with the previously stated comprehensive package put forth by Trump.
Trump noted that UK Prime Minister Kielstarme would work to lower non-tariff barriers and expedite the movement of US goods to the UK. At the same time, the number of unemployment claims in the U.S. has seen a solid decrease, emphasizing the Fed’s ongoing strategies. Claims dropped by 13,000, totaling 228,000 for the week ending May 3rd, although total ongoing claims still hovered just above 1.9 million, nearing a high not seen since 2021.
Looking ahead, analysts at Standard Chartered expect crude oil prices to remain relatively low until a gradual recovery begins with a decline in U.S. oil production. They do predict some temporary technical support, but overall conditions remain rather positive. Recently, they revised their oil price forecast for 2025 down from $76 to $61 per barrel and lowered the 2026 estimate from $85 to $78, attributing these changes to Trump’s tariffs.
