Markets bullish on headlines, fundamental certainty needed ahead of OPEC+ meeting—Rystad Energy Oil Market Update

Global liquids demand is projected to grow by only 700,000 barrels per day (bpd) in 2025.

However, fundamentals from May to August are supportive, with demand growth outpacing supply growth by 0.6 to 0.7 million bpd.

In terms of crude and condensate balances, the demand is likely to outpace for the same period by more than 1.0 million barrels per day.

This is prior to OPEC+’s meeting this Saturday.

Liquids demand growth this summer is being driven by Europe and the Middle East, rather than Asia or North America.

On the supply side, growth is led by Saudi Arabia, US, Canada and Brazil.

However, Canada and Brazil are already facing headwinds.

In Canada, wildfires pose a potential risk to output, while Brazil may encounter softer demand due to increased availability of alternative supplies.

Refinery crude demand growth, meanwhile, is coming from Asia, North America, Europe and Russia.

Russian refinery runs could become particularly significant as stricter sanctions target its crude exports, potentially prompting a push to refine more domestically.

Overall, oil market uncertainty is likely to prompt many countries to maximize refinery runs and build product inventories, especially as stock levels remain low across regions.

On the crude supply front, US production is already facing challenges as there’s no longer talk of a ‘drill baby drill’ resurgence.

Notably, Kazakhstan and other OPEC+ members are expected to see output declines from May through August, creating space for select OPEC+ producers to bring some supply back online.

Saudi Arabia may also support refinery margins by offering lower crude prices for July.

Product cracks remain healthy, incentivizing high refinery utilization.

The return of high sulfur fuel oil cracks into positive territory is also encouraging for even simpler refineries to run at higher rates.

In this environment, driven by public narratives and differing opinions, OPEC+ has an opportunity to increase supply modestly in July.

However, beyond August into September, this window could close, and any further increase would likely depend on supply disruptions elsewhere in the market.