Page 26 - FIPI - Policy Economic Report - May 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Oil Market

Crude oil price – Monthly Review

Oil prices resumed their downward trajectory in late April and early May, as trade tensions weighed on
financial and commodity markets, and OPEC+ agreed to further unwind production cuts. Bearish
sentiment eased somewhat after the United States reached a trade deal with the United Kingdom
followed by a 90-day accord with China. Nonetheless, heightened trade uncertainty is expected to exert
pressure on the global economy and, consequently, oil demand. Brent crude oil futures fell by $14/bbl in
April, reaching a four-year low of just above $60/bbl by early May.

Against the backdrop of a weaker global economic outlook and declining oil demand, OPEC+ surprised
the market in early May by announcing a second consecutive monthly production increase of 411 kb/d
for June. This move effectively advances the group’s production schedule to levels previously planned
for October 2025. However, the actual output gain is expected to be lower than the nominal figure, as
several countries including Kazakhstan, the UAE, Iraq, and Russia continue to produce above their
targets, while others face capacity constraints or are required to make compensatory cuts for prior
overproduction. Considering the new supply targets through June, OPEC+ is now set to add an additional
310 kb/d in 2025 and 150 kb/d in 2026. Tighter sanctions enforcement on Venezuela, Iran, and Russia
could potentially offset some of this increase.

Meanwhile, one of the most immediate effects of the recent slump in oil prices is anticipated to be on
U.S. shale output. In their latest earnings calls, independent producers indicated plans to reduce rig
counts and trim 2025 capital expenditure guidance by up to 9%.

Crude spot prices averaged lower in April, extending losses from the previous month. This decline was
primarily driven by falling futures prices and weaker market sentiment stemming from escalating trade
tensions, particularly between the U.S. and China. Selling pressure from hedge funds and other money
managers further exacerbated the decline. Spot prices fell less than futures prices, reflecting supportive
physical market fundamentals, particularly for prompt-loading volumes. This was evident in the
widening of the North Sea Dated–ICE Brent spread during the first three weeks of April, which reached
nearly $3/b, largely offsetting the narrowing seen later in the month. On a monthly average, the spread
increased slightly by 1¢ in April, settling at a premium of $1.08/b.

In April, the OPEC Reference Basket (ORB) value declined by $5.02, or 6.8% month-on-month, to
$68.98/b, as all component values fell in line with their respective crude oil benchmarks. Lower official
selling prices across most components in the three main markets also contributed to the decline. On a
year-to-date basis, the ORB value was down by $8.85, or 10.6%, compared to the previous year,
averaging $74.82/b.

Brent crude ranged an average to $63.67 a barrel and WTI ranged to $60.77 per barrel in the month of
May 2025.

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