The US-China tariff agreement gave a boost to oil prices this week, which was somewhat dampened late-week by fears of oversupply resulting from a potential US-Iran nuclear deal. Gas prices declined this week, after increased domestic output and decreased flows to LNG export terminals in recent weeks.
BKR Rig Count | The total active drilling rigs in the United States decreased by 2 last week, to 576.Oil rigs dropped by 1 to 473, and gas rigs dropped by 1 to 100.Rig count in the Permian Basin dropped by 3 to 282 | May 16 | BKR NAM Rig Count
US Crude Inventories, excluding those in the Strategic Petroleum Reserve (SPR), increased by 3.5 MMbbl to 441.8 MMbbl (about 6% below the 5y average for this time of year). On the products side, gasoline decreased by 1 MMbbl (3% below the 5y average). Distillate fuels decreased by 3.2 MMbbl (16% below the 5y average). Total commercial petroleum inventories increased by 4.9 MMbbl | May 9 | EIA Weekly Report
Oil prices rose after Iran's foreign minister said no formal proposal had been received from the US on nuclear talks, downplaying prospects for a breakthrough. The potential impact of an Iran nuclear deal on oil supply is limited, with estimates suggesting an additional 200,000 to 300,000 barrels a day, which wouldn't significantly affect the market. Oil prices also climbed due to reports of Israel striking Houthi-held areas in Yemen, raising fears of broader regional conflict and supporting a second weekly gain in oil prices | May 16 | Bloomberg
Aramco anticipates steady oil demand with potential for additional growth if the ongoing US-China trade disputes are resolved. This forecast comes amid a temporary reduction in tariffs by both countries, aiming to mitigate a trade war that has sparked global economic concerns. Despite a 4.6% decline in first-quarter (Q1) profits, attributed to lower sales and increased operating costs, Aramco remains optimistic about the future | May 14 | GlobalData
Egypt is buying large amounts of oil to run its power plants due to the high cost of natural gas, with a recent tender for nearly 2 million tons of fuel oil. The country's domestic gas production is rapidly declining, turning it from a net exporter of LNG to a net importer, and it is now seeking to buy LNG through longer-term deals to reduce dependency on volatile spot markets. Egypt's pivot towards oil is expected to increase carbon emissions, and its fuel oil requirement is unusually large for the time of year, pushing northwest Europe's high-sulfur margin to a seasonal high | May 16 | Bloomberg
Average US oil exports dropped 10% to 3.76 mbpd in the four weeks through May 9, according to EIA, in an early sign that this year’s long-expected oil glut is starting to form. The drop is attributed to a combination of factors, including the global trade war, reduced refinery capacity, and cheap Middle Eastern barrels flowing into the market. According to Energy Aspects however, the recent pullback in demand for US crude in overseas markets is “likely short-lived as global refining margins are strong right now” | May 15 | Bloomberg
The European Union is working on a new sanctions packagetargeting the Russian financial sector to pressure President Putin to negotiate a peace deal to end the war. The new package will sanction the Nord Stream pipelines, lower the oil price cap, and list more vessels of the Russian shadow fleet. Ukraine and European powers have demanded a 30-day unconditional ceasefire to create space for negotiations on a peace deal, but Putin hasn't agreed to the truce | May 16 | Bloomberg
Looking ahead
IEA – Oil Market Monthly Report – May 2025 | Global oil demand growth is projected to slow from 990 kb/d in 1Q25 to 650 kb/d for the remainder of the year as economic headwinds and record EV sales curb use. Demand growth averages 740 kb/d in 2025 and 760 kb/d in 2026, despite accelerating OECD declines of -120 kb/d and -240 kb/d, respectively. World oil supply looks on track to rise by 1.6 mb/d to 104.6 mb/d on average in 2025, and by an additional 970 kb/d in 2026. Non-OPEC+ producers are set to add 1.3 mb/d this year and 820 kb/d next year, even as US LTO supply has been reduced. Taking into account the new supply targets through June, OPEC+ will add 310 kb/d of extra supply this year and 150 kb/d in 2026. OPEC+ surprised the market in early May by announcing a second consecutive monthly increase of 411 kb/d for June. The actual gain will be lower than the nominal figures, as a number of countries – including Kazakhstan, the UAE, Iraq and Russia – continue to produce above their targets, while others are constrained by capacity limits and some will make compensatory cuts for previous overproduction. A further tightening of sanctions enforcement on Venezuela, Iran and Russia may yet offset some of those OPEC+ increases. Meanwhile, one of the most immediate impacts of the recent slump in oil prices is expected to fall on US shale output. In their latest earnings calls, independent producers said they would opt to trim rig counts and shave up to 9% off previous 2025 capital expenditure guidance. As a result, IEA lowered their forecast for US light tight oil production for the second month in row, by 40 kb/d in 2025 and 190 kb/d in 2026. US total supply growth is now assessed at 440 kb/d and 180 kb/d, respectively, reaching 20.9 mb/d in 2026. As US tight oil growth slows, conventional projects will underpin non-OPEC+ supply increases of 1.3 mb/d this year and 820 kb/d in 2026. With the rises in global supply expected to considerably outpace demand growth, oil inventories are forecast to jump by an average of 720 kb/d this year and 930 kb/d next year, compared with a decline of 140 kb/d in 2024. This sets the stage for a further rebalancing of supply and demand fundamentals | May 15 | IEA
OPEC Monthly Oil Market Report – May 2025 | Global oil demand is expected to grow by 1.3 mb/d y-o-y in both 2025 and 2026, unchanged from last month. OECD demand is projected to rise about by 0.1 mb/d, while non-OECD demand will increase by 1.2 mb/d in each year. Non-DoC liquids supply is forecast to grow by 0.8 mb/d y-o-y in both 2025 and 2026, with each revised down by 0.1 mb/d from last month, with the US, Brazil, Canada, and Argentina as the key drivers. DoC NGLs and non-conventional liquids are expected to rise by 0.1 mb/d in both years, reaching an average of 8.5 mb/d in 2026. Capital spending for oil E&P in non-DoC countries rose by about $3 bn year-on-year in 2024 to $299 bn but is expected to decline by around 5% in 2025 and a further 2% in 2026, reaching $277 bn. In the US, upstream E&P liquids investment in 2024 is estimated to have dropped by 8%, y-o-y, to about $125 bn. The decline in investment may impact 2025–2026 production, despite ongoing efficiency and productivity improvements. With this, non-DoC liquids supply is expected to grow by 0.8 mb/d in 2025 to average 54.0 mb/d. OECD output (excluding Mexico) is expected to increase by 0.5 mb/d, y-o-y, mainly from production increases in the US, Brazil, Canada and Norway. US crude and condensate production is expected to increase by 130 tb/d, with NGLs and biofuels up a combined 200 tb/d. Canada’s production, particularly from oil sands, is forecast to grow by 120 tb/d, and North Sea output by 50 tb/d. In the non-OECD (excluding DoC), output is set to rise by 260 tb/d, led by Latin America with a 250 tb/d, mainly due to several offshore ramp-ups and start-ups in key countries, as well as additional tight oil production in Argentina. In 2026, non-DoC supply is forecast to grow by 0.8 mb/d to 54.8 mb/d. OECD liquids output (excluding Mexico) is expected to rise by 0.3 mb/d, with US and Canada growth of 280 tb/d and 110 tb/d, respectively. US crude and condensate will grow by just 44 tb/d, while NGLs are forecast to rise by 190 tb/d amid strong natural gas demand in 2026. Latin America remains the main non-OECD growth driver in 2026, accounting for over 95% of the region’s liquids output growth. These forecasts are expected to face some uncertainties, particularly given the ongoing macroeconomic developments across regions | May 14 | OPEC
Oil price uncertainty results in 2025 activity drop and 2026 production declines in US crude supply | Oil prices have fallen dramatically since early January, dropping below $60/bbl WTI for brief trading periods. In the long term, WTI below $60 would drive significant production declines in Lower 48 onshore (easily over 500,000 bbl/d in 12 months unless operators accept a 75% reinvestment rate versus the current 60%). Those low prices will not only materialize in production declines. Uncertainty in global markets will influence behavior, with the corresponding production response coming in 2026. The recent softening of oil prices will have long-ranging effects far greater than is reflected in the value of a barrel of oil. Uncertainty has been injected into global markets, and domestic producers continue focusing on shareholder value, resulting in spending restraint. Oil-directed capital will decline to just $84.7 billion this year, leaving Lower 48 onshore volumes to decline by 200,000 bbl/d compared to Dec 2024, and a further 200,000 bbl/d decline in 2026 | May 13 | S&P
