Global Crude Oil Prices Dip Below $80 as Demand Slows and US Output Surges

Written By Shruti Kant

Global crude oil prices have fallen sharply in May, with Brent crude slipping below $80 per barrel for the first time since January and West Texas Intermediate (WTI) trading between $63–$66, as weakening global demand and rising US inventories exert downward pressure on the market.

According to the International Energy Agency (IEA), global oil demand growth has slowed to 0.96 million barrels per day (mb/d), revised down from the earlier forecast of 1.2 mb/d. This marks a significant deceleration from the post-COVID recovery levels and reflects weakening consumption in major economies, particularly China, Europe, and OECD transport sectors (IEA, 2025).

Meanwhile, US crude production has surged to near-record highs of 13.3 mb/d, with shale producers capitalizing on improved drilling efficiency and cost management. The US Energy Information Administration (EIA) reports elevated inventory levels, particularly in Cushing, Oklahoma, pushing WTI into a discount range against Brent (EIA, 2025).

The supply glut comes amid increasing uncertainty within OPEC+, the cartel of oil-producing nations led by Saudi Arabia and Russia. While Riyadh remains committed to voluntary production cuts, Moscow has reportedly boosted crude exports through undisclosed channels, undermining group cohesion. With the current cut agreement set to expire in June 2025, analysts warn that a breakdown in coordination could send prices tumbling further (OPEC, 2025).

Despite ongoing geopolitical tensions—including instability in Gaza, Houthi naval threats in the Red Sea, and broader Middle East unrest—the traditional risk premium attached to crude futures has shrunk. From a high of $6 per barrel in early 2024, the geopolitical premium is now estimated at just $2/barrel, signaling increased market desensitization.

The strength of the US dollar has compounded the issue. The DXY Index remains elevated above 105, raising the cost of oil imports for emerging markets such as India, Turkey, and Nigeria, further suppressing demand in price-sensitive economies. In local currency terms, Indian crude oil costs are up 9.3% year-on-year, according to Ministry of Petroleum data.

Speculative interest has also waned. The latest CFTC Commitments of Traders Report shows that hedge funds and institutional traders have cut net long positions by 18%, signaling a retreat from bullish bets in the face of macroeconomic headwinds and volatile price action (CFTC, 2025).

Regional Impacts & Market Reactions

  • China: May crude imports dropped ~6% YoY. Sluggish travel recovery and weak refinery margins dampened buying appetite.

  • India: Despite strong underlying consumption, the rupee’s depreciation has made imports expensive. Fiscal stress is mounting as the government faces rising subsidy burdens.

  • Europe: A warm spring and continued EV penetration have softened diesel and gasoline demand, further impacting refinery throughput.

  • United States: Gasoline demand is plateauing despite a tight labor market, suggesting a structural decline in fossil fuel reliance.

Contrasting Economic Views

Goldman Sachs and several OPEC ministers maintain that market tightening will resume in the second half of 2025 as spare capacity declines. However, the OECD and IEA argue that global structural demand is weakening due to energy efficiency gains and electrification trends.

Analysts also point to an emerging consensus that speculative trading is now playing a reduced role in driving oil prices compared to 2022–23, when price swings were more responsive to financial flows than physical fundamentals.

Outlook: Price Scenarios for June–September 2025

Scenario Brent Crude Price Range Key Assumptions
Base Case $75–$85/barrel OPEC+ extends cuts; US output stable; China demand sluggish
Bull Case $90–$95/barrel Major supply disruption; GDP rebound; geopolitical shocks
Bear Case $65–$70/barrel OPEC+ breakdown; US overproduction; global slowdown worsens

Crude Oil Price Trend (Jan 2023 – May 2025)

Source


Shruti Kant

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