Oil markets kicked off the new year in a downbeat mood, with Wall Street analysts almost unanimously predicting a huge oversupply in 2025 even if OPEC+ did not add a single barrel back into the market. Well, it’s six months on, and oil markets have continued to defy these bearish expectations.
OPEC’s second-largest producer, Iraq, was the single biggest supplier of crude from the cartel to the United States in May, per data from the U.S. Energy Information Administration (EIA) cited by Iraqi media outlets Shafaq News and IraqiNews.
Oil markets are now refocusing on OPEC+ as the Iran-Israel ceasefire continues to hold, with the cartel’s meeting this weekend likely to be the next big market mover.
OPEC+ will make its August oil production decision on the fly during the upcoming July 6 meeting, Russia confirmed on Friday, suggesting there would be no pre-negotiating behind closed doors.
Crude oil prices began trading with a loss this week as traders anticipated another OPEC+ supply boost next month at a rate of 411,000 barrels per day, taking the cumulative increase this year to 1.78 million barrels daily, according to preliminary reports.
In the past, oil price wars were short, sharp and, to those who profited from them, sweet. Now, an oil price war is a more cautious affair—assuming what OPEC is doing with its supply return is a price war, of course. And because most assume just that, all eyes are on the group’s chances of success. These are uncertain, to say the least, with most demand forecasts predicting a disaster for prices.
The OPEC+ group was likely betting on robust demand during the peak summer driving season when it decided to start accelerating the oil production hikes in May. The market proves it has been right.
At the end of the second quarter and the start of the third quarter, demand growth will not lag supply growth materially, according to analysts.
OPEC estimates that global oil demand will grow by 1.3 million barrels per day in both 2025 and 2026, which is in stark contrast with the demand estimate of the International Energy Agency. The IEA sees oil demand growth this year at less than 1 million bpd. Although demand rose by 990,000 barrels daily over the first quarter, the IEA expects this to slow considerably to just 650,000 bpd over the remainder of the year.
The global oil market has been rocked in recent months by the move from eight core OPEC+ nations to relax supply restraints at a faster-than-expected pace, potentially adding supplies just as trade frictions menace demand. The surprise shift has been presented as a bid by the cartel to reclaim market share from rival drillers, as well as punish its own quota cheats.
A week ago, the 39th OPEC and non-OPEC Ministerial Meeting was held via videoconference, chaired by Prince Abdulaziz bin Salman Al-Saud, Saudi Arabia’s Minister of Energy. According to a press release, the group pledged to “develop a mechanism to assess the maximum sustainable production capacity (MSC) of member countries that will be used as reference for 2027 production baselines”.