USOIL

USOIL (WTI Crude) Fundamentals – May 2025
1. Supply and Demand Dynamics
Global Oil Demand:
The International Energy Agency (IEA) projects global oil demand growth will slow from 990,000 barrels per day (bpd) in Q1 to around 650,000 bpd for the rest of 2025, reflecting economic headwinds and record-high efficiency gains.
The IEA’s latest report (May 2025) estimates total demand will rise by 741,000 bpd in 2025, reaching 103.9 million bpd, with emerging markets (China, India, Africa, Latin America, Middle East) driving most of the growth.
OECD demand is expected to decline, while non-OECD demand remains geographically diversified.
Global Oil Supply:
Global crude oil and liquids supply is forecast to average 104.4 million bpd in 2025, up 1.8 million bpd (+1.7%) from 2024.
Non-OPEC+ countries (U.S., Brazil, Guyana, Canada) are expected to contribute most of the supply growth, potentially resulting in a supply surplus.
OPEC+ extended its 3.7 million bpd supply cuts to the end of 2026, but voluntary cuts will be gradually phased out starting April 2025.
Supply-Demand Balance:
The EIA expects a supply surplus in 2025 as non-OPEC+ supply growth outpaces demand increases, especially with OPEC+ phasing out some cuts.
2. Inventory and Refinery Data
U.S. Inventories:
U.S. commercial crude oil inventories fell by 2.7 million barrels at the end of April, now about 6% below the five-year seasonal average.
Gasoline and distillate inventories remain below average, suggesting tightness in refined product markets.
U.S. refineries are operating at 88.6% capacity, with robust input and flat-to-lower gasoline production.
3. Geopolitical and Macro Factors
Trade Policy and Geopolitics:
Recent easing of U.S.-China trade tensions and progress in U.S.-Iran nuclear talks have improved risk sentiment and supported oil prices.
Hopes for a Russia-Ukraine ceasefire and de-escalation in the Middle East have reduced risk premiums, but the market remains sensitive to any setback in negotiations.
OPEC+ Compliance:
OPEC+ compliance with production cuts was high (112%) in March 2025, tightening supply and helping prices rebound from recent lows.
4. Price Trends and Outlook
Current Prices:
WTI crude is trading around $62.80–$63.50, rebounding from recent lows but still well below early 2025 peaks.
Price volatility remains high (Brent’s 30-day realized volatility peaked at 35%), reflecting sensitivity to geopolitical headlines and inventory data.
Forecasts:
J.P. Morgan maintains a Brent forecast of $66/bbl for 2025, with expectations for prices to remain under pressure due to supply surplus, but potential for mid-$70s if trade optimism and OPEC+ discipline persist.
Futures markets price WTI at an average of $75/bbl for 2025, though this is above current spot prices.
Summary Table
Factor Current Status/Impact (May 2025)
Global Demand Growth Slowing, driven by emerging markets
Global Supply Rising, led by non-OPEC+ (US, Brazil, Guyana)
OPEC+ Policy Extended cuts, gradual phase-out
US Inventories Below 5-year average, supporting prices
Geopolitical Risk Lower, but market remains headline-sensitive
WTI Price Range $62.80–$63.50 (recent), futures avg $75/bbl
Volatility High, driven by macro and geopolitical uncertainty
Conclusion
USOIL fundamentals for May 2025 reflect a market balancing slower demand growth, robust non-OPEC+ supply, and cautious optimism on geopolitics. Ongoing OPEC+ discipline and below-average inventories provide some support, but the risk of a supply surplus and persistent volatility keep prices capped. Watch for trade policy shifts, OPEC+ compliance, and inventory trends as key catalysts for the month.