Global oil markets are under mounting pressure as a combination of rising supply and weakening demand pushes prices to their lowest levels in over a year, fuelling fears of prolonged instability.
Brent crude, which briefly surged above $80 per barrel in mid-June amid Middle East tensions, has since plummeted to $67.76. The September contract hovered just below $67 on Friday. In the United States, West Texas Intermediate (WTI) dropped to $65.61 per barrel — marking an 11.27% weekly decline, the sharpest since the early pandemic crash in 2020.
The downturn is being driven by a complex interplay of factors, led by Opec+ plans to increase production. The group, spearheaded by Saudi Arabia and Russia, is preparing to raise output again in August, with a proposed 411,000 barrels-per-day hike set to be discussed at its upcoming July 6 meeting. This move is part of a broader effort to unwind nearly 1 million barrels per day in voluntary cuts.
Market jitters have intensified as several producers, notably Kazakhstan, already exceed their quotas. Chevron’s expansion of Kazakhstan’s Tengiz field has lifted production to a record 1.86 million barrels per day — nearly 400,000 above the target. The rising output has alarmed traders who fear swelling inventories could further depress prices.
“Rising inventories and slowing demand are anchoring prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. “Without a significant catalyst, we could see them drift even lower.”
Earlier geopolitical concerns that briefly buoyed prices have largely dissipated. A surprise ceasefire between Israel and Iran, announced on June 24, erased a $10-per-barrel risk premium. Iranian oil exports, previously threatened by regional tensions, have remained steady at 1.7 million barrels per day, and tanker rates have since normalised. “Markets now see further escalation as unlikely,” said Giovanni Staunovo, energy analyst at UBS.
Adding to the bearish sentiment is a bleak demand outlook. The International Energy Agency (IEA) recently cut its 2025 demand growth forecast to 720,000 barrels per day, while the US Energy Information Administration (EIA) predicts a slightly higher 800,000 barrels — both among the weakest projections in years. China, the world’s top crude importer, is a key driver of this slowdown as it transitions toward cleaner energy and services-led growth.
In the US, weak refining margins and slowing fuel demand reflect broader economic pressures. Despite a 5.8 million-barrel draw in inventories, refinery utilisation remains below expectations at 86%, and gasoline crack spreads have dipped below five-year averages.
Energy analysts warn that unless a major disruption occurs — such as a natural disaster, policy change, or fresh geopolitical crisis — oil prices may remain subdued well into 2025. Non-Opec+ nations, including the US, Brazil, and Canada, are also increasing output, contributing further to the global supply glut.
“The fundamentals are misaligned for a sustained rally,” said Tamas Varga of PVM Associates. “If Opec+ continues to add barrels, prices will struggle to rebound.”
