Since mid-March, international crude oil prices have experienced a rebound. NYMEX WTI crude oil futures rose from $65.6 per barrel on March 10 to $69.37 per barrel by March 25, an increase of about 5.7%. Similarly, ICE Brent crude oil futures rose from $68.65 per barrel to $72.54 per barrel during the same period.
This price rally is driven by supply-side disruptions, including geopolitical crises and U.S. sanctions, which have led to downward revisions in crude oil production forecasts for 2025. OPEC+'s implementation of compensatory production cuts has eased concerns about oversupply. However, factors such as China’s shift to new energy vehicles and reduced oil demand in the U.S. due to tariffs and fiscal tightening make it unlikely that crude oil will break away from its oversupply trend.
Renewed Supply Disruptions Among OPEC+ Producers
OPEC+ has agreed to implement compensatory production cuts targeting countries that exceeded their quotas. These cuts started at 199,000 barrels per day in March and will increase to 435,000 barrels per day by September before tapering off. Despite these efforts, the IEA projects a daily oversupply of 450,000 barrels in 2025 if OPEC+ maintains current production levels.
Geopolitical conflicts, particularly between Russia and Ukraine, continue without resolution. The U.S. has intensified sanctions against Russia, Iran, and Venezuela, further complicating global crude oil exports. Russia has lowered benchmark prices for its crude and refined oil products to counter higher shipping costs.
Rising Output from Non-OPEC+ Producers
Non-OPEC+ producers like the U.S., Brazil, Canada, and Guyana are accelerating output growth to fill the deficit. The IEA forecasts that competitive supplies from these nations will continue to outpace consumption growth, contributing to the oversupply in 2025. The U.S. is expected to contribute the most significant output increase.
Weak Demand Growth Continues
The IEA has lowered its forecast for global oil demand growth in 2025 due to heightened trade tensions and macroeconomic uncertainties. In the U.S., demand growth is slowing due to economic decelerations in manufacturing and consumer spending. In China, the accelerated adoption of new energy vehicles has likely peaked road fuel demand.
Conclusion: Likely Downturn After Price Rebound
In conclusion, while OPEC+ producers have implemented compensatory cuts and faced U.S. sanctions, leading to a short-term price rebound, increased output from non-OPEC+ nations and weak demand suggest that oversupply pressures remain. Consequently, crude oil prices are likely to decline again after this temporary resurgence.
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