Geopolitics Aside, Oil Enters Balancing Act
Espresso Briefing #8: Key oil market developments this week, short and sharp like your morning espresso.
4 min read
Oil Market Summary
Market trending toward surplus as OPEC+ ramps supply, while non-OPEC output remains strong; demand growth is moderate, stockpiles mixed, refining margins elevated but outlook uncertain. Crude prices hover ~$67–71/bbl.
*MMBD = millions of barrels per day
1. Supply (+2.6 MMBD global growth in 2025)
OPEC+:
+548 kbd planned for August (vs +411 kbd in July), aiming to reclaim share and respond to low inventories.
Additional voluntary cuts may be fully unwound by September.
Non-OPEC:
U.S., Brazil, Canada contributing ~1.3 MMBD growth in 2025.
However, U.S. shale decline rates are steeper than previously estimated, absorbing some surplus.
Regional breakdown:
OPEC: produces ~41 MMBD, export ~19 MMBD (mostly to Asia).
Non-OPEC: adding ~1.3 MMBD YoY.
2. Demand (+1.3 MMBD global, both 2025–26)
OECD: modest ~0.1 MMBD growth in 2025, led by Americas.
Non-OECD: robust +1.2–1.3 MMBD (China, India, Asia driving), consistent across forecasts.
Outlook: ~+0.7 MMBD in 2025; summer transport and improved U.S.–China trade support this, though OECD softness caps upside.
3. Inventories (mixed)
Global Overview
+1.0 MMBD — Since February 2025, global oil inventories have grown at about 1 million bpd, adding approximately 93 million barrels in May alone.
Supply-side influences: OPEC+ production increases and non-OPEC supply growth are outpacing demand, driving systematic stock builds.
Regional Breakdown
OECD
U.S. weekly patterns:
Crude stocks dropped by ~5.8 million barrels to 415.1 mb for the week ending June 20
However, two weeks earlier, EIA reported a surprise build of +680,000 bbl.
Larger drawdown of –11.5 million barrels was reported mid-June, the largest in a year, bringing total stocks to ~421 million barrels.
Cushing inventories fell ~995,000 bbl in that period.
Fuel stocks:
Gasoline inventories down by ~2.1 to 227.9 million barrels.
Distillates (diesel/heating oil) dropped ~4.1 to 105.3 million barrels.
Refinery utilization: U.S. refinery runs rose by ~125,000 bpd to 94.7% cap, the highest since July 2024; utilization earlier fell ~1.5pp to 93.2%.
Non-OECD / China
Onshore stocks: Satellite data indicates China’s onshore crude inventories reached a record 1.127 billion barrels; globally, onshore + floating stocks hit multi-year highs (~160 mb offshore).
Floating storage: Elevated volumes at sea reflect logistical or timing issues—ports congested or traders waiting on price movements.
Strategic Stocks & OECD Days Supply
IEA data shows OECD strategic reserves and commercial days‑cover are up, offering more buffer room even as market tightness fluctuates.
4. Refining
Capacity
Global refining capacity reached 103.8 MMBD in 2024, up +1.04 MMBD YoY; OECD grew (+0.16 MMBD) while Europe/Asia saw closures. Dangote refinery in Nigeria adding significant capacity in Africa while the Middle East has also ramped up refining capacities.
Crude runs
Refinery throughput rose by +0.52 MMBD in 2024 (to ~86 MMBD); IEA forecasts 83.7 MMBD runs in 2025, marginally down due to weaker margins.
Margins
Composite margins hit US $8.37/bl in May—the highest since Mar 2024—boosted by tight product supply.
Product tightness: diesel supply down ~100 kbd YoY, gasoline down ~180 kbd; demand up ~28 kbd.
Outages
Shutdowns in major facilities (U.S., Europe: BP/Shell/Petroineos; Nigeria’s Dangote; Mexico’s Olmeca; Iberian power failure) have strained capacity.
5. Upcoming Events & Risks to Watch
OPEC+ virtual meeting (Aug 3): to confirm supply trajectory.
U.S. tariff decision (Jul 9): could affect trade flows.
EIA weekly inventory reports: next due July 9th.
Geopolitics: Middle East tensions/Iran‑Israel flare‑ups may tighten supply.
Macro indicators: PMI, OECD demand data, non‑OPEC supply updates important throughout H2 2025.
🔍 Takeaway
Bearish drivers: OPEC+ and non‑OPEC supply growth, moderate OECD demand, and persistent inventories.
Bullish factors: refinery outages tightening product supply, strong non‑OECD demand, and potential of sudden geopolitical shocks in the Middle East and Eastern Europe.
Outcome: elevated refinery margins signal near‑term tightness, but rising supply and cooling demand may pull Brent toward $60–65/bbl by year‑end—absent major disruptions.