Oil Market Report - May 2025

In May 2025, global crude oil markets experienced a volatile but moderately bullish month, driven by a tug-of-war between mounting oversupply concerns and episodic bullish geopolitical and macroeconomic news.

EXECUTIVE SUMMARY

In May 2025, global crude oil markets experienced a volatile but moderately bullish month, driven by a tug-of-war between mounting oversupply concerns and episodic bullish geopolitical and macroeconomic news. The ICE Brent front-month contract began the month at $61.06 per barrel and closed at $63.57 on May 27, marking a gain of $2.51 or +4.1%. WTI rose from $58.21 to $60.89 over the same period, up by $2.68 or +4.6%. These increases occurred despite persistent fears of an accelerating supply glut due to aggressive OPEC+ production hikes and tepid demand forecasts. Overall, the price action during the month was defined by a clear early-month bearish trend, a mid-month relief rally on macro and trade news, and a late-month reversal driven by long-term supply concerns. The first trend emerged between May 1 and May 6, when oil prices fell sharply on fears that OPEC+ had lost its ability—or willingness—to discipline supply. This bearish trajectory was temporarily reversed between May 6 and May 13 amid easing trade tensions. Diplomatic breakthroughs between the U.S. and both the U.K. and China—alongside OPEC’s slightly optimistic demand stance—fueled a sharp rebound in crude prices. From May 14 onward, the upward momentum began to wane. Although prices remained relatively elevated, both benchmarks faced renewed selling pressure as the market focused again on structural oversupply. Additional signals from OPEC+ pointed to continued output increases into Q3, while the IEA revised global supply growth upward to 1.60 mbd for 2025—significantly above demand growth estimates. The volatility remained elevated, albeit less severe than in April, with a monthly trading range equating to around 15% for both Brent and WTI crude futures.

Moving into June 2025, the outlook for crude oil futures is shaped by a combination of persistent macro headwinds, supply-driven market anxiety, and fading bullish momentum observed in the second half of May. From a technical point of view, both Brent and WTI closed the month near the lower end of a sideways trading range that formed after their mid-May peaks. For Brent, this range is defined by resistance near $66.50–66.80 and support around $63.00–63.50. WTI has shown similar behavior, with key resistance near $63.50–63.90 and support near the $60.00–60.50 zone. The May price structure exhibits a clear double rejection of the upper boundary of these ranges around mid-May, indicating that the market is encountering supply-driven resistance at higher levels. The price action since mid-May also shows a bearish divergence in momentum indicators (e.g., RSI, MACD), suggesting waning bullish conviction. Both benchmarks formed lower highs and have struggled to make higher lows, which is technically a cautionary sign. This, combined with a flattening short-term moving average structure (e.g., 20-day and 50-day EMAs), hints at consolidation or even downside potential unless a strong bullish catalyst materializes. Moreover, May’s price trajectory fits a broader descending channel that has been forming during the entire first half of 2025. From a fundamental point of view, several bearish themes threaten to exert downward pressure on both crude benchmarks throughout June as well. Firstly, it’s the OPEC+ production development. The accelerated unwinding of voluntary cuts—411 kbd increases planned monthly through October—signals a structurally looser market. Without meaningful production discipline from chronic over-producers (Russia, Iraq, Kazakhstan), the market is likely to remain oversupplied, keeping rallies capped unless demand improves significantly. Secondly, it’s demand-side cautions. Despite temporary macro boosts in May from easing trade tensions, underlying demand signals remain soft. The IEA recently revised 2025 global demand growth to only 740 kbd, well below the 1.60 mbd supply growth forecast. This imbalance makes any rally vulnerable unless demand metrics improve. Lastly, it’s a geopolitical backdrop. Although supportive to prices in early May, geopolitical risks appear increasingly priced in. New sanctions on Russia and disruptions in Venezuela offer short-term support, but neither shifts the broader structural outlook unless they result in meaningful net export losses—which so far they have not.

According to the International Energy Agency, world oil supply looks on track to rise by 1.6 mbd to 104.6 mbd on average in 2025, and by an additional 970 kbd in 2026. On the one hand, as OPEC+ again surprised the market in early May by announcing a second consecutive monthly increase of output by 411 kbd for June, the IEA now projects that OPEC+ set to pump an additional 310 kbd this year and 150 kbd in 2026. On the other hand, the agency has lowered its forecast for U.S. tight oil production for the second month in row, by 40 kbd in 2025 and 190 kbd in 2026, as one of the most immediate impacts of the recent slump in oil prices is a fall of U.S. shale output. In their latest earnings calls, independent producers said they would opt to trim rig counts and shave up to 9% off previous 2025 capital expenditure guidance. In result, the IEA now assesses U.S. total oil supply growth at 440 kbd in 2025 and 180 kbd in 2026, respectively, reaching 20.9 mbd in 2026. As U.S. tight oil growth slows, conventional projects will underpin non-OPEC+ supply increases of 1.3 mbd this year and 820 kbd in 2026.

The same time, the U.S. Energy Information Administration reported only minor fluctuations in global oil production in April 2025 relative to the prior month. Thus, total output registered a negligible decline of approximately 6 kbd, essentially unchanged in from the preceding month. Despite this minimal monthly movement, the reported level marked a three-month low, reinforcing a subtle but consistent downward trajectory observed over the past two months. On an annual basis, however, world oil production maintained a robust upward momentum, expanding by approximately 1.63 mbd from a year ago, equivalent to an increase of 1.6% YoY. This consistent annual rise extended an upward trend now sustained over seven consecutive months. Moreover, global output exceeded the five-year average for April by a notable 4.57 mbd, signifying a 4.6% increase. Muted dynamics of the overall world oil supply was driven by nuanced production dynamics with contrasting trends across OPEC and non-OPEC producers.

Total OPEC crude oil output continued its moderate downward trajectory in April 2025, according to cartel’s own data, declining by 66 kbd from the previous month, a 0.2% MoM reduction. This marked the lowest production level recorded in the past three months and extended a two-month streak of month-over-month declines. Despite the recent dip, year-on-year production rose by 135 kbd, or +0.5% YoY, continuing a five-month trend of modest annual growth. However, the pace of this expansion has noticeably cooled, registering its weakest rate in four months. Relative to historical norms, the cartel’s overall output remained well below average, trailing the five-year benchmark for April by 1.16 mbd, or -4.2%.

Amid the weaker outlook for the world economy and global oil demand, OPEC+ again surprised the market in early May by announcing a second consecutive monthly increase of 411 kbd for June, effectively advancing the cartel’s production to levels it had previously scheduled for October 2025. However, the actual gain will be lower than the nominal figures, as a number of countries including Kazakhstan, the U.A.E., Iraq and Russia continue to produce above their targets, while others are constrained by capacity limits and some will make compensatory cuts for previous overproduction.

Total oil production among non-OPEC countries continued to edge higher in April 2025 and reached a new high for the year, increasing by 176 kbd from March. This represented a 0.2% MoM rise, while on an annual basis, production expanded by 1.08 mbd, marking a 1.5% YoY increase compared to April 2024. The year-on-year gain maintained a four-month streak of upward momentum. When viewed against the five-year seasonal average, April's production stood out sharply—up 4.03 mbd, or +6.0%. So, April 2025 marked another step upward for global non-OPEC supply, primarily driven by continued expansion in the Americas and a notable rebound in the CIS. However, regional disparities remain stark, with Europe and parts of the Middle East and Africa showing signs of structural and operational headwinds.

U.S. total oil production in April 2025 registered a marginal decline on a month-over-month basis, falling by 40 kbd relative to March, or -0.2% MoM, marking the lowest monthly output in the past three months. This minor dip extended a short-term downward trend now lasting two consecutive months. Despite this recent softening, the longer-term trajectory remains notably positive. Year-over-year, national output rose by 819 kbd, representing a solid 3.7% YoY increase. This sustained annual growth has now persisted for seven months, reinforcing the structural strength underlying U.S. oil production. When measured against the five-year seasonal average for April, reported output levels exceeded the norm by impressive 2.76 mbd, or +13.6%, highlighting the sector’s continued expansion relative to historical benchmarks. While aggregate oil production in the country saw a minor setback due to weakness in crude oil and renewable fuel segments, the overall year-on-year trajectory remains firmly upward with NGLs emerged as the longer-term growth engine.

U.S. shale oil supply saw an almost flat monthly dynamic in April, declining by just 2 kbd, effectively a 0.0% MoM change. Although marginal, this slip was sufficient to end a two-month streak of growth. Over a longer horizon, shale oil remains resilient, with April marking the 48th consecutive month of year-over-year increases. The annual gain of 176 kbd, or +1.7% YoY, represented the continuation of this strong trend, though it too slowed to its weakest pace in over a year. From a structural standpoint, shale’s footprint continues to grow—its output is now 1.3 mbd above the five-year April average, up 14.3%. This strength translated into an increase in its share of total U.S. crude oil output, which rose to 77.74%.

The International Energy Agency projects global oil demand growth to slow from 990 kbd in 1Q25 as latest non-OECD delivery data, especially for China and India, have been weaker than expected. The agency now sees growth at a more subdued rate of 650 kbd for the remainder of 2025, resulting in an average annual increase of 740 kbd followed by a rise of 760 kbd in 2026. Despite the recent soft patch, emerging economies remain the main driver of growth, adding 860 kbd this year and 1 mb/d next year in contrast to an accelerating decline in OECD countries of -120 kbd and -240 kbd, respectively.

The U.S. Energy Information Administration also reported noticeable weakness in global oil consumption in April 2025, recording a month-on-month decline of approximately 740 kbd, equivalent to a 0.7% MoM contraction. This downturn represented the lowest consumption volume registered globally in the past half-year, marking a continuation of the downward trajectory initiated a month earlier. Despite this near-term softness, total oil usage around the world remains on a sustained upward trend when assessed on a year-over-year basis, increasing by around 980 kbd, or +1.0% YoY, relative to the corresponding month in 2024. Nevertheless, April's annual growth rate was notably subdued, marking the slowest expansion pace observed over the previous five months. Compared to the historical five-year average for the month of April, global oil consumption remains robust, outpacing the average by approximately 6.59 mbd, or +6.9%.

Total commercial OECD oil inventories experienced only modest growth in February 2025, increasing by approximately 49 thousand tons compared to January, or less than +0.1% MoM. Despite the marginal movement, inventories have reached their new highest level in six months, continuing an ascending month-on-month trajectory established over the past four months, albeit at the slowest pace of expansion observed during this period. When examined against the same period last year, inventories were higher by around 169 thousand tons, though again, the growth was negligible in percentage terms, marking the slowest year-over-year acceleration in the last four months. Relative to the five-year seasonal average, reported stocks stood significantly lower, down by 34.7 million tons, or approximately -6.9%, indicating persistent tightness on the global oil market.

Meantime, the International Energy Agency stated that global oil stocks rose by 25.1 million mb in March 2025, led by a 57.8 mb increase in crude, but at 7 671 mb remained well below the five-year average (-221 mb). Total OECD inventories increased by 3.1 mb within the month, while non-OECD stocks rose by 21.3 mb and oil on water was up slightly by 0.7 mb. Preliminary data show global oil inventories built further in April. With the rises in global supply expected to considerably outpace demand growth, the agency forecasts oil inventories to jump by an average of 720 kbd (260 mb) this year and 930 kbd (335 mb) next year, compared with a decline of 140 kbd (50 mb) in 2024. This sets the stage for a further rebalancing of supply and demand fundamentals.

Total U.S. oil inventories exhibited minor dynamics during April 2025, contracting by approximately 3.57 mb month-over-month, a modest decline of about 0.2% MoM. This decrease, though marginal, marked the lowest inventory level observed within the last twelve months. The overall stockpiles have now seen consecutive month-over-month declines for the past four months, signaling a tightening market condition. Nevertheless, year-over-year figures remained opposite, with inventories rising by 2.53 mb, a marginal 0.2% YoY increment from the prior year's corresponding month, although it represented the slowest annual growth rate in the last twelve months. Relative to historical trends, the reported inventory level remains significantly below the five-year average for April, down by approximately 171.65 mb, or -9.7%, highlighting continued structural tightness.

However, crude oil inventories at the Cushing storage hub in Oklahoma demonstrated notable growth during April 2025, rising by 620 kb month-over-month, a solid increase of approximately +2.5% MoM. This uptick marked the highest inventory level recorded in eight months, reflecting short-term easing of storage pressures at this critical junction. Despite this, the longer-term trend remains decidedly negative. Year-over-year, stocks at Cushing were sharply lower, showing a considerable drop of 7.76 mb, equivalent to a steep 23.2% YoY decline compared to April of the previous year. This contraction signifies the continuation of a persistent downward annual trajectory, extending now for six consecutive months. Furthermore, compared to the five-year average for April, the reported inventory level was down by approximately 15.42 mb, representing a significant 37.5% deficit.

Global offshore oil inventories demonstrated a significant shift in April 2025, marking a notable turnaround from recent trends. Worldwide stockpiles surged by 38.50 million barrels (mb), according to Vortexa’s data, providing an impressive month-over-month increase of approximately 66.7%. This robust recovery halted a brief two-month downward cycle and achieved the highest recorded level in nearly two years. Moreover, this was the swiftest monthly expansion observed in the last five years. Year-over-year, global inventories grew by 27.70 mb, representing a 40.4% YoY rise and setting the fastest annual growth pace in 21 months. Nevertheless, when juxtaposed with the five-year average for April, reported inventory levels remained 8.72 mb lower, reflecting an 8.3% shortfall.

AC - Oil Market Report - May-2025.pdf

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