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Oil prices are entering the summer with multiple, conflicting forces at play. Brent crude averaged $68 per barrel in April 2025 — down by $5/b from March— but the EIA projects it to decline to an average of $66 per barrel for the year, reflecting downward pressure from rising global inventories and supply growth. The current price for Brent is $64.04, while for WTI it is $60.81. The EIA expects the global rate of consumption growth for oil to fall from the 990,000 bpd rate observed from January through March to roughly 650,00 bpd for the rest of the year as macro uncertainty looms, especially after U.S. GDP fell 0.3% in Q1, its first contraction since 2022. |
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Figure 1: Prices of Brent to WTI over a ~3-year period OPEC+ remains the market’s focal point as traditional geopolitical catalysts—Russia-Ukraine and U.S.-Iran talks have stalled— and U.S.-EU tariff threats were postponed until July. Eight members (Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman) of OPEC+ are expected to approve a July oil production increase of 411,000 barrels per day (bpd) this Saturday, continuing the group’s phased reversal of prior cuts totaling several million barrels per day since 2022, aimed at supporting prices and adjusting to market demand. This follows similar hikes in May and June by the same eight-member countries and comes ahead of the full 22-member OPEC+ meeting on Wednesday, where no broader policy shift is anticipated. Beyond that, OPEC+ production targets for May include Saudi Arabia at 9.2 million bpd (m bpd), Russia at 9.08 m bpd, and the UAE at 3.02 m bpd, underscoring the alliance’s continued influence on supply. Meanwhile, non-OPEC producers are steadily advancing. U.S. output is forecast to reach 13.4 m bpd in 2025, up from 13.2 m bpd in 2024, while total new global field production could hit 2.9 mb/d—the highest in a decade. |
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Figure 2: US Crude Oil Production: 2022 to 2025 Goldman Sachs has doubled down on this bearish outlook, as supplies increase. Its analysts project non-OPEC ex-Russia ex-shale output growth of about 1 mb/d over the next two years, driven by new projects in Saudi Arabia and Qatar. Excluding shale is notable: weak prices have already slowed U.S. fracking growth, and if low prices persist, peak shale output could arrive sooner than expected. Goldman’s baseline projects Brent at $60 in 2025, falling to $56 in 2026, and WTI from $56 next year to $52 thereafter. These forecasts come despite Goldman nudging its demand growth estimate up to 0.6 mb/d in 2025 and 0.4 mb/d in 2026—a sign the bank sees supply as the dominant factor in price direction.
Not all agree. UBS points to tighter visible inventories in Q1 as evidence of a more balanced market, suggesting that both supply and demand projections may need upward revisions. The Swiss bank argues that actual stock draws contradict the “substantial surplus” assumed by Goldman and others. However, ICE futures are currently favoring a bearish outlook for the rest of the year, with drops of more than $2/b for both WTI and Brent for the October 2025 contracts.
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Figure 3: Brent and WTI Futures Weather risks add another layer of complexity. The U.S. hurricane season begins June 1, and NOAA forecasts 13–19 named storms, of which 3–5 could become major hurricanes (category three or higher). Last year’s Hurricane Francine forced the shutdown of roughly a fifth of oil production in the Gulf of Mexico for over a week, illustrating vulnerability in Gulf refining, especially in regards to impact on prices in the latter half of the year. Any severe storm could tighten regional supply and briefly lift prices, even against a backdrop of ample inventories.
Looking at the rest of the year, the EIA sees global supply at 104.13 m bpd in 2025 versus demand of 103.7 m bpd. This structural oversupply underpins expectations for lower prices throughout the year, despite periodic rallies on weather or geopolitical flare-ups.
In summary, the oil market is being shaped by rising non-OPEC output, OPEC+ supply tweaks, a reduction in demand growth, and persistent economic and weather uncertainties, driving prices downward for the year. Goldman’s bearish price forecasts hinge on a surge in non-OPEC non-shale supply—but UBS’s challenge and looming hurricane risks remind traders that even in an oversupplied market, short-term disruptions can lead to sharp, if temporary, price moves. The interplay of these factors will determine whether Brent and WTI prices remain on a downward path toward the low-$60s and potentially high-$50s or find support from unexpected tightening events. |