Page 28 - Policy Economic Report - April 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

Following a period of relative stability, global oil markets were disrupted by a series 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.

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.

Hedge funds and other money managers’ net long positions dropped in the first half of the month by
nearly 7%, fuelling oil price volatility. However, net long positions rebounded in the second half of the
month. Between the Last weeks of February and March, speculators raised net long positions in the two
major futures contracts ICE Brent and NYMEX WTI by nearly 23% and were net buyers of about 66 mb.

Crude oil spot prices fell for a second consecutive month in March, driven by the decline in oil futures
markets and further easing of oil supply risk premiums. Spot prices also came under pressure from lower
refining margins in all major markets, as well as lower global refinery intake amid refinery maintenance
season. Higher crude stocks in the US and signs of a well-supplied crude market in the Atlantic Basin also
weighed on the spot market. The drop in spot prices was particularly pronounced in sour crude benchmark
Dubai as worries about supply disruptions of sour crude eased. The Dubai benchmark also faced
downward pressure due to slow demand from Asia Pacific refiners and more favorable west-to-east
arbitrage economics.

In March, the ORB value declined by $2.81, or 3.7%, m-o-m, to stand at $74.00/b, as all ORB component
values decreased alongside their respective crude oil benchmarks. This largely offset higher official selling

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