Page 30 - Policy Economic Report - August 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

Oil prices have been caught in the crosshairs of fast-changing market dynamics. While new sanctions on
Russia and Iran threaten to impact trade flows, weaker economic growth is poised to temper demand.
Volatility in oil markets slumped to near all-time lows in July as Brent crude oil futures hovered around
$70/bbl. However, the early August OPEC+ supply agreement and the prospects for untenable stock builds
later in the year saw Brent crude futures slip to around $67/bbl.

Global oil demand growth for 2025 has been repeatedly downgraded since the start of the year, by a
combined 350 kb/d. Demand is now projected to rise by around 700 kb/d this year and next. The latest
data show lacklustre demand across the major economies and, with consumer confidence still depressed,
a sharp rebound appears remote. Consumption in emerging and developing economies has been weaker
than expected, with China, Brazil, Egypt and India all revised down compared with last month’s Report.
Aviation has been an exception, with robust summer travel propelling jet fuel demand to all-time highs in
both the United States and Europe.

While oil market balances look ever more bloated as forecast supply far eclipses demand towards year-
end and in 2026, additional sanctions on Russia and Iran may curb supplies from the world’s third and
fifth largest producers. At the end of July, the U.S. Department of the Treasury announced its most
significant Iran-related sanctions since 2018, aimed at making it more difficult for Iran to sell its oil.
Washington is also pressuring major buyers of Russian crude oil, most notably India, to scale back
purchases. For its part, the European Union has imposed a ban on imports of oil products refined from
Russian crude oil starting in January 2026.

Spot prices showed a mixed trajectory in July, despite robust physical market fundamentals during the
summer holiday season, as uncertainties in the futures market influenced spot price performance. Prices
were supported by strong refining margins in Europe and the US Gulf Coast (USGC), along with a continued
increase in global refinery intakes, reflecting firm demand, particularly for transportation fuels. This
strength was especially evident in gasoil/diesel margins. The medium sour benchmark Dubai averaged
higher last month, buoyed by firm demand from Asia-Pacific buyers, which reduced the availability of
prompt loading cargoes.

Hedge funds significantly raised their bullish bets on ICE Brent, with net long positions surging by 56.8%,
anticipating disruptions from potential US tariffs. In contrast, NYMEX WTI net long positions fell sharply
by 50.7%, likely reflecting concerns over weakening short-term US economic and demand growth
following new tariff announcements.

Sweet–sour crude differentials showed divergent trends between the East and West of Suez markets. In
the Asia-Pacific, the premium of light sweet crude over medium sour crude narrowed amid a strong sour
crude market and a sharp rise in middle distillate margins. Meanwhile, in Europe and the USGC, sweet –

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