Oil Market Update – July 2025

The global oil market remains volatile in mid-2025, influenced by a complex interplay of geopolitical tensions, shifting supply and demand, and the ongoing energy transition. After significant fluctuations in the second quarter, crude oil prices have begun to stabilise, with Brent crude trading between USD 81 and 84 per barrel and WTI hovering around USD 77 to 80. This stability follows earlier price support from OPEC+ production cuts, robust summer fuel demand, and heightened geopolitical risks in the Middle East and Eastern Europe. However, mixed industrial growth data from China and the U.S. have tempered further price increases.

OPEC+ has reaffirmed its commitment to voluntary production cuts through the end of the third quarter of 2025 to maintain price stability. Saudi Arabia and Russia continue to lead this effort despite some internal pressures from member states eager to increase output to meet fiscal demands. Compliance among members remains high, and only limited supply increases are expected in the near term.

In the United States, shale producers are maintaining disciplined production levels despite relatively favourable prices. Rising operational costs, investor emphasis on capital discipline, and regulatory challenges have constrained aggressive drilling expansion. The Energy Information Administration (EIA) projects U.S. oil output to remain largely flat through the rest of the year.

Geopolitical risks continue to cast a shadow over the market. Ongoing tensions in the Middle East, particularly involving Iran-backed militias and shipping routes through the Red Sea, have added a risk premium to prices. Additionally, conflicts in Eastern Europe persist in disrupting energy trade flows and logistics, especially for refined products. The market remains highly sensitive to any escalation that could threaten global supply chains or key transit corridors.

Demand outlooks present a mixed picture. In China, domestic travel and transport fuel consumption remain robust, yet manufacturing and export activities show uneven momentum, creating uncertainty around full-year demand projections. In the U.S. and Europe, summer travel has bolstered fuel demand, but inflationary pressures and tighter monetary policies are restraining broader consumption growth. Reflecting these dynamics, the International Energy Agency (IEA) has slightly lowered its global oil demand growth forecast to between 1.0 and 1.2 million barrels per day for 2025.

Despite increasing investment in renewable energy worldwide, fossil fuels remain vital for short- and medium-term energy security. Major oil companies are navigating this transition by balancing traditional production with investments in cleaner technologies such as carbon capture, biofuels, and hydrogen. ESG considerations continue to attract heightened scrutiny, particularly from institutional investors in Europe and North America, influencing both capital allocation and operational strategies within the sector.

Looking ahead, the oil market is expected to remain range-bound in the near term, with Brent crude likely trading between USD 75 and 85 per barrel unless disrupted by major geopolitical events. Key factors shaping price direction include supply discipline by producers, macroeconomic trends, and evolving consumer demand patterns. Investors should closely monitor upcoming OPEC+ meetings, U.S. Federal Reserve interest rate decisions, China’s economic stimulus efforts, and global refinery utilisation and inventory levels to anticipate market movements.