[ad_1]
The impact of these tariffs is being felt across the oil complex. The Energy Information Administration and several investment banks revised down global demand growth forecasts, warning that oil consumption could fall by up to 1% if global GDP slips below 3%. Rystad Energy highlighted that Chinese demand, previously expected to grow by up to 100,000 barrels per day, is at risk of stagnating. Market participants are pricing in a prolonged downturn in industrial activity, particularly in Asia, where recent restocking may not repeat unless prices remain deeply discounted.
Geopolitical Risks Offer Limited Support as Supply Concerns Build
While demand fears dominate, supply-side risks have emerged as a potential counterbalance. The U.S. administration signaled a hardening stance toward Iran, with the Energy Secretary declaring the U.S. can “stop Iran’s export of oil.” Iran currently exports over 1 million barrels per day, mostly to China, and any disruption could materially tighten global balances. Additionally, uncertainty around U.S.-Iran nuclear talks and the potential for military escalation remain in play, offering a floor under prices even as other pressures mount.
However, any bullish momentum from these risks was tempered by OPEC+’s decision to increase output by 411,000 barrels per day in May. This supply bump, arriving in a fragile demand environment, has revived concerns of a potential market surplus. Russian ESPO crude falling below the G7 price cap further underscored the oversupply signals.
U.S. Production Margins Under Strain as Rig Counts Fall
U.S. shale producers are also facing pressure. With breakeven levels around $65 per barrel, current prices are straining profitability, particularly when accounting for debt servicing and rising equipment costs driven by tariffs. Rig counts have already declined by over 380 from peak levels, and more cuts are likely unless pricing conditions improve. While this could lead to a future supply crunch, for now it adds to market caution.
Oil Prices Forecast: Bearish Outlook Holds as Demand Risks Lead
[ad_2]
