Page 24 - Policy Economic Report - July 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

Benchmark crude oil prices increased by approximately $7 per barrel on average in June, fluctuating
widely between $65 and $80 per barrel. Prices spiked mid-month following Israeli air strikes on Iranian
military and nuclear facilities, with North Sea Dated briefly exceeding $80 per barrel. However, prices
subsequently returned to pre-conflict levels after a ceasefire agreement was reached.

These developments occurred amid growing geopolitical tensions and an apparently oversupplied market.
In June, global oil production increased by 950 kb/d month-on-month to 105.6 mb/d—representing a
significant 2.9 mb/d rise compared to the same period last year. Beginning July 2025, the OPEC+ alliance
announced a larger-than-anticipated increase in production targets for August by 550 kb/d, effectively
reversing 80% of the 2.2 mb/d voluntary production cuts that have been in place since 2023.

World oil supply is now projected to grow by an average of 2.1 mb/d in 2025 to 105.1 mb/d, and by an
additional 1.3 mb/d to reach 106.4 mb/d in 2026, with non-OPEC+ countries contributing the majority of
this growth—1.4 mb/d and 940 kb/d, respectively. In contrast, global oil demand is expected to grow at a
more moderate pace, with an estimated increase of 700 kb/d in 2025 and 720 kb/d in 2026, reaching
104.4 mb/d. Nonetheless, seasonal factors are temporarily tightening the market. Refinery throughputs
are forecast to rise by 3.7 mb/d from May to August to meet summer travel demand in the Northern
Hemisphere. Additionally, crude oil burning for power generation typically doubles during this period,
reaching around 900 kb/d.

Furthermore, China’s newly implemented policies to enhance energy security are positioning national oil
companies as strategic storage partners for the government. This approach effectively removes significant
volumes from the global market. Chinese firms are expected to continue expanding inventories, and the
rate at which these stockpiles grow in the coming months will play a critical role in shaping the global oil
market balance.

Hedge funds and other money managers sharply raised their bullish positions amid substantial financial
flows into the ICE Brent futures contract. Net long positions in ICE Brent and NYMEX WTI rose by 28%
throughout June, and speculators bought an equivalent of 78 mb during the same period.

Crude oil futures prices rebounded firmly in June. The recovery was driven by heightened geopolitical
tensions, a rising supply-risk premium, and improving sentiment surrounding trade discussions between
the US and its key economic partners. Supportive market fundamentals, reflected in a substantial draw in
US crude stocks, further underpinned prices. However, market volatility was elevated. Crude futures
began to recover at the beginning of the month, buoyed by a shift in market sentiment, as participants
focused on tighter supply expectations amid growing geopolitical uncertainty in Eastern Europe and
unplanned supply outages. Wildfires in Canada led to the temporary shut-in of around 350 tb/d of
production, contributing to a more bullish outlook for near-term supply. A weakening US dollar added
support to the positive momentum during the first trading week. However, persistent concerns over the
trajectory of US-China trade negotiations capped upward momentum.

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