IEA forecast: The International Energy Agency (IEA) expects global oil supply to increase by 1.6 million barrels per day (bpd) this year, driven by Saudi Arabia and OPEC+ members unwinding output cuts. Despite a slight increase in the forecast for oil demand growth to 740,000 bpd, the pace is expected to slow in the latter half of the year due to economic headwinds and rising electric vehicle sales. The total oil demand for the year is projected to average 103.90 million bpd. The IEA also noted that the surplus in the global market will rise slightly to about 730,000 bpd.
Iran: President Trump announced that the U.S. is close to securing a nuclear deal with Iran, though gaps remain in the negotiations. Talks between U.S. and Iranian negotiators ended in Oman with further discussions expected. Iran insists on continuing uranium enrichment but is willing to agree to a deal in exchange for lifting economic sanctions. Both sides prefer diplomacy but are divided on key issues, including uranium enrichment levels and sanctions relief. Iran seeks guarantees that future agreements won't be abandoned, while the U.S. demand shalting enrichment.
Russian Shadow Fleet: Estonia attempted to stop a UK-sanctioned oil tanker sailing without a flag, leading Moscow to send a fighter jet to circle the tanker. Western sanctions on Russia have led to the emergence of a "shadow fleet" of tankers that help maintain Russian crude exports. These unregulated vessels often have opaque ownership and lack top-tier insurance, raising safety and environmental concerns. The UK, EU, and U.S. have imposed sanctions on many of these tankers, but monitoring compliance is challenging. Despite sanctions, Russia continues to benefit from oil exports, with China and India purchasing discounted crude, while the shadow fleet grows and operates with minimal disruption.
Market Overview: The energy complex is mixed this morning but with strength earlier in the week it appears that it will be a second consecutive weekly gain due to easing U.S.-China trade tensions. However, optimism was tempered by higher supply expectations from Iran and OPEC+. The prospect of an Iranian nuclear deal, which could release more oil into the global market, caused both contracts to fall over 2% in the previous session. Despite potential supply pressures, both Brent and WTI are up around 1.5% this week.
EIA Report
The May Short-Term Energy Outlook from the EIA forecasts a slowdown in crude oil and liquid fuel consumption growth over the next two years, driven by slower economic growth, especially in Asia. Global GDP is expected to increase by 2.8% in 2025 and 2026, the lowest growth rates since 2008, excluding the contraction years of 2020 and 2009. This economic slowdown, coupled with uncertainty inworld trade, manufacturing, and investment, poses a downside risk to oil consumption. Despite ongoing growth, oil consumption is projected to increase by less than 1 million barrels per day in 2025 and 2026, marking three consecutive years below this threshold. Tariffs on U.S. trading partners may further impact global trade and oil consumption.
Oil prices rose today, heading for a second consecutive weekly gain due to easing U.S.-China trade tensions. Despite this, gains were limited by expectations of higher supply from Iran and OPEC+. The prospect of an Iranian nuclear deal, which could ease sanctions and increase Iranian crude supply, caused oil contracts to fall over 2% in the previous session. Investor sentiment improved with the U.S. and China agreeing to a 90-day pause on their trade war, although long-term trade policy uncertainty remains. The products finished the week mixed, heating oil futures down and gas futures up.
