After a period of relative calm, global oil markets were roiled by a barrage of trade tariff announcements in early April. Benchmark crude oil prices plunged to their lowest levels in four years on a sharp escalation in trade tensions and the prospect of higher supplies from some OPEC+ countries. Brent futures tumbled by more than $15/bbl, to below $60/bbl, but subsequently recovered to around $65/bbl after the implementation of some of the tariffs was postponed.
While imports of oil, gas and refined products were given exemptions from the tariffs announced by the United States, concerns that the measures could stoke inflation, slow economic growth and intensify trade disputes weighed on oil prices. With negotiations and countermeasures still ongoing, the situation is fluid and substantial risks remain. We have lowered the economic growth assumptions that underpin our forecasts, leading to a 400 kb/d reduction in expected oil demand growth for the remainder of the year. We now forecast an annual global demand increase of 730 kb/d for 2025 as a whole.
The downward spiral in oil prices was also fuelled by the surprise decision of eight OPEC+ members, which were party to voluntary cuts since November 2023, to triple their scheduled production target increases for May to 411 kb/d. However, the actual increase may be much smaller, as a number of countries, including Kazakhstan, the United Arab Emirates and Iraq are already producing well above their targets. Notably, Kazakh crude oil output reached a record high of 1.8 mb/d following the start-up of the Chevron-operated Tengiz oilfield expansion project. This puts Kazakhstan some 390 kb/d above its OPEC+ output quota. In addition, several countries in the group have committed to compensate for earlier overproduction in the coming months, which may negate most of the increase.
The significant drop in oil prices rattled the US shale patch, with firms arguing they need $65/bbl on average to profitably drill new light tight oil wells, according to the latest Dallas Fed Energy Survey. New tariffs may also make it more expensive to buy steel and equipment, further discouraging drilling. Along with the impact of Chinese tariffs on imports of US ethane and LPG, this has resulted in a downward revision of 150 kb/d to our US oil supply forecast for this year, with growth now assessed at 490 kb/d. However, conventional oil projects remain on track, with total non-OPEC+ supply expected to rise by 1.3 mb/d.
Meanwhile, our first detailed look at balances for 2026 show oil demand growth easing to 690 kb/d amid a fragile macroeconomic environment and as EVs take up a larger share. For now, the outlook for non-OPEC+ supply growth remains robust at 920 kb/d, comfortably eclipsing expected global demand growth, even as US supply expansion slows to just 280 kb/d. Brazil (+240 kb/d), Guyana (+160 kb/d) and Canada (+120 kb/d) will be other major sources of growth.
With arduous trade negotiations expected to take place during the coming 90-day reprieve on tariffs and possibly beyond, oil markets are in for a bumpy ride and considerable uncertainties hang over our forecasts for this year and next.
