Trade Tensions and Supply Shifts: Oil Markets Navigate a Volatile Spring
May 2025 brought a complex mix of macroeconomic headwinds and supply-side surprises, reshaping sentiment across global oil markets. From tariff escalations to OPEC+ production shifts, traders and refiners faced a dynamic pricing environment that demanded agility and foresight.
Crude Prices: A Tale of Two Halves
- Brent crude fell sharply in April, hitting a four-year low just above $60/bbl in early May.
- A rebound followed mid-month, with prices recovering to $66/bbl after the U.S. reached trade deals with the UK (May 8) and China (May 12).
Key Insight: Market sentiment remains highly reactive to geopolitical and trade developments, with volatility compressing into shorter timeframes.
Demand Outlook: Growth Slows, But Not Everywhere
- Global demand growth is projected to slow to 650,000 bpd for the remainder of 2025, down from 990,000 bpd in Q1.
- OECD demand is declining, while emerging markets—notably India and Southeast Asia—continue to drive net growth.
Supply Dynamics: OPEC+ Surprises the Market
- OPEC+ announced a 411,000 bpd production increase for June, accelerating its original timeline.
- However, actual gains may be limited due to overproduction in countries like Iraq, Russia, and the UAE.
Strategic Note: The market is watching closely for compliance and compensatory cuts, especially as sanctions tighten on Venezuela, Iran, and Russia.
📉 Refining Margins and Inventories
- Refining margins hit 12-month highs in late April, buoyed by a shift in crude pricing and strong non-OECD throughput.
- Global oil inventories rose by 25.1 million barrels in March, with preliminary April data showing continued builds.
🧠 What Traders Should Watch
- Tariff policy: U.S. trade actions remain a wildcard for demand and sentiment.
- Refining spreads: Margins are strong, but sensitive to feedstock shifts and freight costs.
- OPEC+ discipline: Production compliance will shape price floors heading into Q3.
