Sopuruchi Onwuka

Progress made on US-China trade negotiations and the improvement in the US-Iran nuclear negotiations have joined to erode pessimism on oil demand at a time the OPEC+ supply bloc has indicated nearly half a million barrels of incremental output.

These are the bases for market pundits to speculate that the uptick in prices noticed ahead of President Trump’s visit to the Middle East might be vulnerable to the trade dynamic hovering around the US president.

And with President Trump taking handshakes in the Middles East, the core OPEC producers including Saudi Arabia and United Arab Emirates are expected to wield strong supply influence on the oil market’s future trajectory in favor of US sentiments.

Market analysts from Standard and Poor’s, Rystad and oil companies agree that while the visiting US president might have secured enormous goodwill with massive investment and trade deals from the world’s swing producers, there is the added benefit that Middle East countries would give more cooperation to President Trump’s call for greater oil supply to tame prices in the market.

Senior Vice President and Global Head Oil of Commodity Markets at Rystad Energy, Mukesh Sahdev, stated in an oil market update that preventing any oil price spikes in the summer likely remains central to the Trump’s agenda.

He pointed out that President Trump’s Middle Eastern tour is timed very well to subdue bullish oil price environment visible in the growth curve in refinery crude demand between May and August.

With non-OPEC+ producers around the world not growing their production and entering seasonal maintenance, the OPEC+ decision to add extra barrels in May and June fits well into that agenda, he noted.

He pointed out that production boost from OPEC+ members becomes important as potential US-China trade resolution erodes demand concerns and GDP risk, adding that concerns remain on how US actions related to Iran, Russia and Venezuela would result in supply disruptions or additions.

Rystad Energy reduced its oil demand growth prediction from 1.1 million barrels per day to 0.7 million barrels per day considering that there would still be some lasting impact on trade flows from the tariffs even if there are rollbacks, as is being announced.

 Asia would lead in providing that growth with India being a key factor to watch as the border related tensions may cast a shadow on growth.

A higher need for stock build-up ahead of the summer and for geopolitical readiness could also bring some demand forward.

Rystad Energy continues to view crude balances on the rise in the summer with 2.0 million barrels per day of growth in refinery crude demand.

There is a likelihood of higher crude demand for power as the mercury rises much higher than in earlier years.

The overall estimates signal a lower crude runs outlook relative to 2024. However, seasonal growth is going to be strong driven by the US, Europe, and the Middle East.

On the supply side, Rystad Energy estimates that the core OPEC eight members’ reversal of planned cuts is due to the declining balance of OPEC+ members like Iran, Venezuela and Mexico, owing to sanctions and tariffs.

Many of the other members are in natural declines supporting the OPEC+ unwind without causing a price slide.

On the non-OPEC+ side, the expectation of US crude production growth in 2025 has been further eroded to approximately 0.3 million barrels per day, as per the latest rig and well data estimates.

New projects in Brazil have the potential to add average 0.4 million barrels per day in 2025 and 2026.

The production potential of Brazil and other non-OPEC+ countries is likely to be more a function of the buyer’s appetite.

For example, in 2024, the Chinese purchase of Brazil barrels dropped by 0.3 million barrels per day placing backpressure on production.

This could be true for many non-OPEC+ countries.

Overall, Rystad Energy analysis signals upside in oil prices and refinery margins towards the summer providing the incentive for constructive fundamentals.