Crude Oil: Weak demand

The bearish forces in the oil market remain unresolved as a combination of trade war concerns and recessionary fears weigh on sentiment. OPEC+ has shifted its strategy from defending prices to defending market share, opting to increase production from April despite an already oversupplied market. Additionally, the U.S. administration’s push for a resolution to the Ukraine war may lead to changes in Russian sanctions, potentially increasing global energy flows and further pressuring prices.

At the annual CERAWeek conference, market pessimism was reinforced, with Gunvor Group Chairman Tornqvist highlighting that drilling activity both inside and outside OPEC is outpacing demand growth. Meanwhile, Chinese crude buyers have resumed purchases of Russia’s ESPO crude, taking advantage of lower prices as traders navigate U.S. sanctions, further exacerbating the oversupply issue.

MUFG maintains its bearish outlook, projecting Brent crude to average $69 per barrel in Q2 2025 and $73 per barrel for the year, citing a persistent supply surplus (+0.9m b/d) and high spare capacity (~5.5m b/d) as key drivers. They expect oil prices to trade within a $65-$80 per barrel range, shaped by downside risks from potential Trump-induced tariffs and upside risks from geopolitical uncertainty or stricter sanctions enforcement. Despite their bearish base case, MUFG sees long oil positions as a useful hedge against inflation and supply disruptions.

Goldman Sachs attributes the recent decline in Brent crude to shifting market sentiment rather than supply fundamentals. While concerns over Russian and Iranian supply disruptions previously supported prices, traders are now focused on softer U.S. economic growth, leading to downward revisions in global oil demand expectations. The bank highlights that weaker U.S. GDP growth could dampen fuel demand, overshadowing typically bullish fundamentals like low inventory levels. Moreover, uncertainty around U.S. policy and recession risks have added to market pessimism. As a result, Goldman Sachs has cut its December 2025 Brent crude price forecast by $5 to $71 per barrel and WTI to $67 per barrel, while lowering its global oil demand growth estimate for 2025 from 1.1 million bpd to 900k bpd.WTI 4H

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