Page 5 - FIPI - Policy Economic Report - May 2025

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

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.

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.

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.

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.

Natural gas spot prices at the US Henry Hub benchmark averaged $3.42 per million British thermal units
(MMBtu) in April 2025. Henry Hub's natural gas prices declined for a second consecutive month in April,
falling by ~17%, m-o-m. Higher domestic production contributed to the sharp drop in prices while
demand remained relatively modest amid the injection season. According to data from the US Energy
Information Administration (EIA), average weekly underground storage rose by 10.5%, m-o-m, in the
same period. Prices were further pressured by the prospect of additional capacity in the near term as a
new wave of LNG projects nears commissioning. Prices were up by more than 100%, y-o-y.

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