Oil Market Report - June 2025

Crude oil markets demonstrated exceptional volatility in June 2025 driven predominantly by geopolitical tensions in the Middle East.

EXECUTIVE SUMMARY

Crude oil markets demonstrated exceptional volatility in June 2025 driven predominantly by geopolitical tensions in the Middle East. The month was characterized by three distinct trends: an initial moderate bullish period driven by supply-tightening signals and easing concerns of more aggressive OPEC+ cuts unwinding (June 2-9), a sharp geopolitical-driven spike culminating mid-month (June 11-19), and a dramatic bearish reversal triggered by rapid de-escalation in geopolitical tensions (June 23-26). Throughout the month, these dramatic shifts underscored heightened sensitivity to geopolitical risks versus fundamental supply-demand dynamics, ultimately concluding with Brent and WTI ending moderately higher month-to-date, yet significantly lower than the month's extreme peaks. The most pronounced price movements in June arose mid-month due to significant geopolitical disturbances in the Middle East. On June 13, oil prices surged dramatically after Israeli airstrikes targeted Iranian military and nuclear infrastructure, intensifying fears of widespread regional instability and potential disruptions to the regional crude supplies. Brent briefly spiked to a multi-month high of $78.50, while WTI reached $77.62, reflecting substantial risk premiums as markets feared a possible closure of the Strait of Hormuz by Iran. However, prices sharply reversed from June 23 onwards, triggered by U.S. airstrikes against Iranian sites, which notably avoided critical oil infrastructure, and subsequent news of an Iran-Israel ceasefire. These developments significantly eased market concerns over immediate supply disruptions, causing Brent and WTI to erase much of their earlier gains. By month's end, despite this sharp reversal, average monthly prices remained elevated—Brent averaging approximately $70.1 and WTI around $67.3—highlighting the market's heightened sensitivity to geopolitical events and persistent uncertainty over global supply security.

Entering July 2025, both Brent and WTI futures are positioned within a complex technical landscape following an exceptionally volatile June. Despite Brent and WTI crude ended the month sharply down from their mid-June highs, both benchmarks, however, remain comfortably above their May-end levels, reflecting underlying bullish momentum despite recent sharp corrections. Technically, June's high volatility established a wide-ranging consolidation zone ($65–$80 for Brent, $64–$78 for WTI), suggesting July could initially feature range-bound trading as markets digest June’s extreme volatility and reassess geopolitical risks. From an open-interest standpoint, market dynamics indicate recent liquidations of speculative bullish positions during the late-June reversal. As a result, July opens with reduced speculative long exposure, creating conditions conducive to fresh buying activity should geopolitical tensions resurface. Market sentiment will remain highly sensitive to any Middle Eastern geopolitical updates, especially regarding Iran’s strategic stance towards the Strait of Hormuz and further developments in the Israeli-Iranian conflict. On a fundamental and geopolitical basis, continued uncertainty surrounding Middle Eastern tensions suggests a persistent yet reduced risk premium embedded into prices as July commences. Given June's events, traders will likely approach July cautiously optimistic, sensitive to any headline developments. Renewed threats or actual disruptions in the Strait of Hormuz could rapidly push Brent and WTI back toward their June highs near $78–$80. Conversely, sustained geopolitical calm coupled with continuing oversupply, incremental OPEC+ production increases, or signs of slowing global demand could press benchmarks toward lower technical supports near mid-$60s.

The International Energy Agency reported global oil supply to rise by 330 kbd in May 2025 to 105 mbd, 1.8 mbd above a year ago. Monthly gains were evenly split between non-OPEC+ and OPEC+ as the producer alliance started unwinding some voluntary production cuts. For 2025 as a whole, world oil supply is projected by the IEA to rise by 1.8 mbd to 104.9 mbd and by an additional 1.1 mbd in 2026. Non-OPEC+ producers are forecast to add 1.4 mbd on average this year and 840 kbd next year. However, the agency stresses increasing risks of a major disruption on the global oil market due to a rapid escalation in geopolitical tensions after Israel launched a series of air strikes on targets in Iran on 13 June and Tehran retaliated and Iran has repeatedly threatened to close the key Strait of Hormuz if attacked. Closure of the Strait, even for a limited period, would have a major impact on global oil and gas markets. The Strait is the exit route from the Gulf for around 25% of the world's oil supply, including from Saudi Arabia, the UAE, Kuwait, Qatar, Iraq and Iran.

The U.S. Energy Information Administration also confirmed that global oil production posted a significant uptick in May 2025, reversing the previous two-month downtrend and reaching the new highest output level on records. Total worldwide supply expanded in May by 0.51 mbd, marking a 0.5% increase compared to April. This monthly gain represented the strongest rate of growth since February and signaled renewed momentum in upstream activity. The monthly recovery was accompanied by continued strength on an annual basis: global output rose by 2.08 mbd year-over-year, a 2.0% YoY increase, sustaining a positive trend that has persisted for eight consecutive months. Moreover, global production stood 7.29 mbd above its five-year average for May, representing a notable 7.5% increase relative to seasonal norms. This rebound in world oil output to historical highs was underpinned by synchronized expansions across both OPEC and non-OPEC producers, though the pace and composition of that growth varied. OPEC’s gains were driven heavily by crude oil, while non-OPEC growth leaned more toward NGLs.

Total OPEC crude oil output recorded a significant upswing in May 2025, rising by 312 kbd month-on-month, according to OPEC’s own data, equivalent to a 1.2% MoM increase, as the cartel began to unwind its earlier voluntary production cuts. This marked the strongest monthly expansion in seven months and broke a two-month sequence of declines. Although it was only the first month of accelerated production expansion of the three already announced, the May increase lifted OPEC production to its highest level in a year and a half, confirming a notable pivot in the cartel’s output dynamics. On an annual basis, the bloc posted a gain of 393 kbd, translating to a 1.5% YoY increase — the sharpest yearly acceleration in over two years. Compared to the five-year seasonal average, reported output exceeded the norm by 470 kbd, or +1.8%, underscoring a broader trend of recovery in OPEC’s production baseline.

On May 31, OPEC+ held a virtual summit, where eight core members again decided upon an additional 411 kbd increase in output for July 2025 from June 2025 required production level, continuing the accelerated unwind of cuts for the third straight month. The decision upon August 2025 production levels will be taken during the next OPEC+ meeting on 6 July 2025. However, OPEC+ also indicated that a similar level of supply increase will take place in August, September, and October – unless the chronic over-producers (including Kazakhstan, Iraq, and Russia) not only comply with previously agreed quotas but also reduce supply further to account for early oversupply. If OPEC+ moves forward with the accelerated plan, the unwinding voluntary cuts of 2.2 mbd will be completed in November of this year, instead of September 2026, which was agreed to December 2024.

Total oil production from non-OPEC countries recorded a solid advance in May 2025, extending its positive momentum for the second consecutive month. Aggregate output rose by 220 kbd from April levels, as per the EIA’s data, marking a month-on-month increase of 0.3%. This brought production to its highest level in six months, underlining the resilience and sustained upward trajectory of non-OPEC oil supply in recent quarters. Notably, the pace of expansion in May was the strongest since February, reinforcing confidence in the sector’s short-term production outlook. On an annual basis, the increase stood at 1.04 mbd, or +1.5% YoY, sustaining a five-month streak of year-over-year growth. When assessed against the five-year seasonal average, May 2025 output exceeded historical norms by 5.11 mbd, corresponding to a 7.7% surplus—a clear indicator of robust structural growth beyond cyclical recovery. May 2025 confirmed a strengthening pattern in non-OPEC supply, with multiple regions contributing to the upward movement, albeit at differing magnitudes. The Americas remain the unequivocal leader in both volume and pace, while other regions such as the CIS and Asia-Pacific offered more moderate, though consistent, support. Europe, meanwhile, remains a clear outlier, facing structural and cyclical headwinds.

Total U.S. oil production posted a substantial monthly gain in May 2025, marking a significant turnaround in the recent production trajectory. Output rose by 162 kbd from the prior month, translating into a 0.7% MoM increase. This expansion broke a two-month streak of sequential declines, resetting the monthly trend with the sharpest increase observed in the past three months. Moreover, this uptick pushed total oil supply in the country to the new highest mark on records, underscoring the robustness of current upstream activity. Year-on-year, the production landscape remained firmly in positive territory. Compared with May 2024, national oil output climbed by 798 kbd, up 3.6% YoY. This performance sustained an uninterrupted eight-month upward trend on a year-over-year basis. When measured against the five-year seasonal norm, May's production exceeded the average by 3.25 mbd, amounting to a notable 16.3% surplus. A clear resurgence in U.S. total oil output in May was driven by an impressive surge in crude oil production. While NGLs showed a short-term pullback and renewables continued to face annual declines, both segments still performed well above their historical seasonal averages. Processing gains also contributed positively on the margin.

U.S. shale oil production contracted in May, declining by 40 kbd, or -0.4% MoM, from April. This marked the second consecutive monthly decline and brought output to its lowest level in four months. While the year-on-year figures remained positive — with a 154 kbd, or +1.5% YoY, increase — the rate of growth was the slowest seen in 49 months, suggesting that shale output, though still structurally dominant, is losing momentum. Compared to its five-year seasonal average, however, shale oil production remained robust, exceeding the mean by 1.57 mbd, or +17.8%. Shale's share in the national crude supply stood at 76.57%, down 163 basis points from the previous month and nearly 93 basis points lower than a year ago.

The International Energy Agency again cut its projections of global oil demand growth for 2025 and 2026 years, albeit only by insignificant 20 kbd for each year. According the most recent IEA’s monthly report, world oil demand is now forecast to increase by 720 kbd in 2025. This is marginally below last month’s estimate, as weak 2Q25 deliveries in the United States and China undercut resilience elsewhere. Growth in 2026, at 740 kbd, will be held back by a challenging economic outlook and the uptake of clean energy technologies.

The U.S. Energy Information Administration also reported a flat monthly dynamic of total oil usage around the world in May, confirming cautious estimates of the IEA regarding the demand side of the global oil market. Thus, as per EIA’s data, global oil consumption in May 2025 posted a minor monthly increase of 31 kbd, a 0.0% change from April. Albeit marginal, this uptick interrupted a two-month sequence of month-on-month declines and represented the strongest monthly dynamics seen over the past three months. On a year-over-year basis, global oil demand expanded by 560 kbd, marking a 0.5% YoY increase compared to May 2024. While this extended a 12-month streak of annual growth, the pace of expansion slowed noticeably, making it the weakest year-over-year performance recorded since June 2024. Nonetheless, demand remained well above historical norms, exceeding the five-year seasonal average by 5.32 mbd, or +5.5%. While global oil demand remained on a soft upward trajectory, this momentum was almost exclusively underpinned by the non-OECD world. Meanwhile, the OECD group displayed signs of both cyclical and structural pressure.

Global oil stocks rose for a third consecutive month, by 32.1 mb in April 2025 to 7 717 mb, led by builds in crude oil inventories in the non-OECD countries, according to the most recent data of the International Energy Agency. While global stocks built by 1 mbd on average since February, total oil inventories remain 90 mb lower year-on-year. Total OECD commercial oil stocks fell by 9 mb to stand 97 mb below a year ago. Preliminary data show global oil inventories surged further in May by a massive 93 mb.

Detailed statistics on March 2025 confirmed earlier estimates, as total commercial oil inventories across the OECD rose modestly, adding 0.8 million metric tons from the previous month. This 0.2% MoM increase brought stocks to their highest level in seven months, sustaining a five-month streak of consecutive month-on-month growth. On a year-over-year basis, inventories climbed by 2.5 million tons, or +0.5% YoY, which not only prolonged a similar five-month upward annual trend but also marked the sharpest year-on-year growth rate recorded in nearly four years. However, despite these recent gains, stock levels remained significantly below long-term norms, registering 31.4 million tons, or -6.3%, under the five-year average for March, signaling continued tightness in structural supply conditions. While crude oil continued to accumulate and supported a general uptrend in total OECD commercial inventories, the downstream segment — particularly distillates and heavy fuel — exhibited pronounced weakness.

Total U.S. oil inventories surged by 30.68 mb in May 2025, recording a 1.9% increase month-over-month. This marked the sharpest monthly expansion in over two years, reversing a four-month period of sequential declines and bringing inventories to their highest level in seven months. On a year-over-year basis, total stocks of oil in the United States were up by 8.98 mb, or +0.6% YoY, sustaining a 13-month rising trend. However, despite the recent uptick, aggregate inventories remained considerably below historical norms, trailing the five-year seasonal average for May by 153.30 mb, or -8.6%. May 2025 witnessed a broad-based rebound in U.S. oil inventories, with both government and commercial storage rising month-on-month. The gains were especially pronounced in the NGL and jet fuel segments, while commercial crude and heavy fuel oil continued to show structural weakness. Despite the monthly recovery, the data point to persistent underperformance relative to historical norms, particularly in strategic and commercial distillate stocks.

Along with broader trends in U.S. crude oil stockpiles, Cushing, Oklahoma—the central pricing and delivery hub for West Texas Intermediate (WTI) crude—saw inventories decline notably in May 2025. Stocks at the storage site dropped by 1.61 mb month-over-month, representing a sharp 6.3% MoM contraction. This marked the steepest monthly rate of decline observed in the past four months and brought total volumes at the facility to their lowest point since January. On a year-over-year basis, the deterioration was even more pronounced. Inventories were down 11.32 mb versus May 2024, equating to a steep 32.0% YoY reduction. The decline extended a persistent seven-month streak of annual contractions, with May registering the fastest rate of year-over-year depletion in five months. Benchmarking against historical norms, Cushing stockpiles continue to lag well behind long-term averages. Inventories ended May 15.23 mb below the five-year average for the month, translating to a significant deficit of 38.7%.

Total offshore oil inventories around the globe experienced a pronounced and broad-based contraction in May 2025, with total volumes falling by 21.34 mb compared to April. This month-on-month decline, equivalent to -22.2% MoM, marked the steepest drop in floating inventories observed over the past nine months. On an annual basis, stocks were down 18.64 mb, or -19.9% YoY, from May 2024 levels, highlighting a persistent tightening trend. When measured against the five-year seasonal average for May, the global offshore stockpile figure came in substantially lower—by 34.02 mb or -31.2%—underscoring the degree of the tightening in seaborne oil storages. The global picture for May 2025 was characterized by an accelerated drawdown in floating oil inventories across most regions, with only the Middle East Gulf and US Gulf Coast showing month-on-month builds. However, these localized increases were not sufficient to offset the overall reduction in stocks globally.

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