Brent starting in read after a week of 2.4% tariff relief gain. Brent crude gained 2.4% (+USD 1.5/b) last week with a close of USD 65.41/b and traded the week in a range of USD 64.53 – 66.63/b. Price gains last week aligned with dissipating tariff angst as China – US trade tariffs were lowered to 10% and 30% respectively. Down from a staggering 125% and 145% though with the risk for a snap-back after 90 days. The low of the week coincided with rumors that an Iran – US nuclear deal was near at hand. But was later downplayed. Such a deal may not add all that much more oil to the market as most of Iran’s oil probably already is in the market through different pathways. Brent crude is pulling back 0.9% this morning to USD 64.9/b while the USD index is declining 0.5% as well. That is usually a positive for the oil price as it makes oil cheaper for all non-USD based consumers. US equity futures are also down 1% this morning. Chinese new and used housing prices fell 0.12% and 0.41% respectively last month with property investments down 10.3% YTD YoY. All weaker than expected. Chinese industrial production YoY however came in at 6.1% and better than the expected 5.7%. Overall a rather weak start of the week nonetheless.

While down this morning, Brent crude is surprisingly not shedding all that much value given the rather bearish backdrop of US equity futures in the red and everyone and their grandmothers forecasting doom and gloom for the oil price.

Speculators added 64 mb to net long positions in Brent crude and WTI over the week to last Tuesday. Most likely as a result of US-China tariffs being shifted down to livable levels. Most headlines and forecasts are however overall very bearish for oil. More oil from OPEC+ in the months to come coupled with expectations for a slowdown in global oil demand growth due to the US tariff trade war.

A lower oil price AND a softer USD will likely bolster global oil demand vs very bearish expectations. Global oil demand growth could surprise to the upside amid all the gloom. In EUR/b terms the the current price of Brent crude is now 22% lower than the average price in 2024. A softer oil price AND a softer USD is making oil considerably cheaper in the eyes of the global oil consumer ex-US. And that portion of global oil demand after all accounts for around 80% of global consumption. We could thus quickly see a Brent crude price down 30% versus 2024 average for 80% of the world’s consumers with a little further decline in USD-oil and the USD itself. This will likely help to boost oil demand globally. Remember also that a very important reason for why OPEC+ wanted to lift its oil production in May and June was to meet sharply stronger Middle East summer oil demand. A note on oil demand. India’s road fuel demand was up 5% YoY in April while its PMI rose to 58.2%. The IEA expects India oil demand to rise by only 2.3% to 5.77 mb/d YoY (+130 kb/d) while a 5% demand growth would yield a demand growth of 282 kb/d YoY.

OPEC+ has NOT abandoned market control. This is not 2014/15/16 or 2020. It is important to remember that the group has not abandoned its general plan of adding 2.2 mb/d from April 2025 to December 2026. The path will be decided on a monthly basis and can be moved both up AND down. The group has NOT abandoned market control. Though it is on a gradual pace to retake 2.2 mb/d of market share. US shale oil production has to stand back to make room and global consumers will respond with stronger demand growth in response to a lower oil price made additionally cheaper by a softening USD.

Brent crude forward curve in front-end backwardation. Surplus is not yet here.

Brent crude in USD/b. Little upside conviction to be found anywhere.

US oil drilling rig count fell by 1 last week to second lowest since December 2021. No real shedding of drilling quite yet. But we’ll likely see a drop of 5-10% over the coming months. It could drop as much as 5-10 rigs per week.

Net long speculative positions in Brent crude + WTI rebounded 64 mb to Tuesday last week.

After a positive start to the week, crude oil prices rose on Monday and Tuesday, with Brent peaking at USD 66.8 per barrel on Tuesday evening. Since then, prices have drifted lower, declining by roughly 5% to around USD 63.5 per barrel – below where the week began during Monday’s opening.

Iran is currently in the spotlight, having signaled its willingness to sign a nuclear deal with the U.S. in exchange for lifting economic sanctions. Ali Shamkhani, a senior political, military, and nuclear adviser, spoke publicly about the ongoing negotiations. He indicated that Iran would commit to never developing nuclear weapons and could dismantle its stockpile of highly enriched uranium – provided there is immediate sanctions relief. While nothing is finalized, the rhetoric is notable and could theoretically lead to additional Iranian barrels entering the global market.

It’s worth recalling that in mid-March, Iran’s Oil Minister declared that the country’s oil exports were “unstoppable”, and that Iran would not relinquish its share of the global oil market – even in the face of new U.S. sanctions introduced earlier this year. In practice, however, this claim has proven exaggerated.

In February 2025, Iran’s crude production rose to 3.3 million barrels per day (bpd), staying above 3 million bpd since September 2023. Of this, approximately 1.74 million bpd were exported – primarily to Chinese private refiners (”teapots”). Early in the year, shipments to these teapots continued largely uninterrupted, as they have limited exposure to the U.S. financial system and remained willing buyers despite sanctions.

However, Washington’s “maximum pressure” campaign has gradually constrained Iran’s ability to ship crude to China. By March 2025, Chinese imports of Iranian oil peaked at approximately 1.8 million bpd. In April, imports dropped sharply to around 1.3 million bpd, reflecting stricter U.S. sanctions targeting Chinese refineries and port operators involved in handling Iranian crude. Preliminary data for May suggest a further decline, with Iranian oil arrivals potentially falling to 1.0–1.2 million bpd, as Chinese refiners adopt a more cautious stance.

As a result, any immediate sanctions relief stemming from a nuclear agreement could unlock an additional 0.8 million bpd of Iranian crude for the global market – an undeniably bearish development for prices.

On the other hand, failure to reach a deal would likely mean continued or even intensified U.S. pressure under the Trump administration. In a worst-case scenario – where Iran loses its remaining 1.0–1.2 million bpd of exports – and if Saudi Arabia or other major producers do not promptly step in to offset the shortfall, global oil prices could experience an immediate upside of USD 4–6 per barrel.

Meanwhile, both OPEC and the IEA expect the oil market to remain well-supplied in 2025, with supply growth exceeding demand. OPEC holds its demand growth forecast at 1.3 million bpd, driven mainly by emerging markets in Asia, the Middle East, and Latin America. In contrast, the IEA sees more modest growth of 740,000 bpd, citing macroeconomic challenges and accelerating electric vehicle adoption – particularly in China, where petrochemical demand is now the primary growth engine.

On the supply side, OPEC has revised down its non-OPEC+ growth estimate to 800,000 bpd, citing weaker prices and reduced upstream investment. The IEA, however, expects global supply to expand by 1.6 million bpd, led by the U.S., Canada, Brazil, Guyana, and Argentina. Should OPEC+ proceed with unwinding voluntary cuts, the IEA warns that the market could face a surplus of up to 1.4 million bpd in 2025 – potentially exerting renewed downward pressure on prices.

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EIA data released yesterday showed U.S. Crude inventories unexpectedly rose 3.45 million barrels with a drop in exports and despite a larger than expected increase in refinery runs.

U.S. commercial crude oil inventories (excl. SPR) rose by 3.45 million barrels last week, reaching 441.8 million barrels – approximately 6% below the five-year seasonal average. Total gasoline inventories declined by 1 million barrels and now sit around 3% below the five-year average. Distillate (diesel) fuel inventories fell by 3.2 million barrels and remain roughly 16% below the seasonal norm. Meanwhile, propane/propylene inventories climbed by 2.2 million barrels but are still 9% below their five-year average. Overall, total commercial petroleum inventories rose by 4.9 million barrels over the week – overall a neutral report with limited immediate price impacts.

After a sharp selloff in late April and early May, Brent crude prices bottomed out at USD 58.5 per barrel on Monday, May 5th – the lowest level since April 9th. This was a natural reaction to higher-than-expected OPEC+ supply for both May and June.

Over the past week, however, oil prices have rebounded strongly, climbing by USD 7.9 per barrel on a week-over-week basis. Brent peaked at USD 66.4 per barrel yesterday afternoon before sliding slightly to USD 65 per barrel this morning.

Markets across the board saw significant moves yesterday after the U.S. and China agreed to temporarily lower tariffs and ease export restrictions for 90 days. Scott Bessent announced, the U.S. will lower its tariffs on Chinese goods to 30%, while China will reduce its tariffs on U.S. goods to 10%. While this is a temporary measure, the intent to reach a longer-term agreement is clearly gaining momentum. That said, the U.S. administration has layered tariffs extensively, making the exact average rate hard to pin down – estimates suggest it now sits around 20%.

In short, the macroeconomic outlook improved swiftly: equities rallied, long-term interest rates climbed, gold prices declined, and the USD strengthened. By yesterday’s close, the S&P 500 rose 3.3% and the Nasdaq jumped 4.4%, essentially recovering the losses sustained since April 2nd.

That said, some form of positive news was expected from the weekend meeting, and now oil markets appear to be pausing after three days of strong gains. Attention is shifting from U.S.-China trade de-escalation back toward market fundamentals and geopolitical developments in the Middle East.

On the supply side, the market is pricing in relaxed restrictions on Iranian crude exports after President Trump signaled progress in nuclear negotiations over the weekend. Further talks are expected within the next week.

Meanwhile, President Trump is visiting Saudi Arabia today – the key OPEC+ player – which has ramped up production to discipline non-compliant members by pressuring oil prices. This aligns well with U.S. interests, especially with the administration pushing for lower crude and refined product prices for its US domestic voters.

With Brent hovering around USD 65, it’s unlikely that oil prices will dominate the agenda during the Saudi visit. Instead, discussions are expected to focus on broader geopolitical issues in the Middle East.

Looking ahead, OPEC+ is expected to continue with its monthly meetings and market assessments. The group appears focused on navigating internal disputes and responding to shifts in global demand. Importantly, the recent increase in output doesn’t suggest an oversupplied market here and now – seasonal demand in the region also rises during the summer months, absorbing some of the additional barrels.