April, 25, 2025
by the InGenius team
- OPEC+ ramps up production fast but could reverse at any moment
- Brent crude drops below $70 signaling trouble not opportunity
- Trade tensions are silently crushing global oil demand
- U.S. oil demand is rising while Asia lags behind
- Today’s cheap oil masks tomorrow’s potential supply crunch
OPEC+ is moving fast. The coalition is now actively unwinding its 2.2 million barrels per day (b/d) of voluntary production cuts, beginning April 2025. A sharper increase is set for May, when production will rise by 411,000 b/d in a single month—three increments rolled into one.
For procurement and commodity professionals, this isn’t just market noise—it’s a signal to reassess contract positions, hedging strategies, and supplier risk profiles.
Key Production Changes
The eight core members of OPEC+--Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman--have agreed to a phased production increase. Yet the plan is flexible. OPEC+ has kept the option open to pause or reverse these increases if market conditions shift unexpectedly. This gives the group tactical control in the face of demand or price shocks.
The UAE will gain an additional 300,000 b/d in quotas by September 2026, reflecting a broader plan to recalibrate internal balances.
The market’s reaction was swift: Brent crude dropped below $70 per barrel following the announcement of accelerated output. That’s the lowest price in months and a clear indication that markets are bracing for oversupply.
Simultaneously, OPEC revised its oil demand growth forecast downward by 100,000 b/d for both 2025 and 2026. The current growth estimate stands at 1.3 million b/d per year—about 1% annually—down from pre-pandemic norms of 1.5-2%.
Trade Wars and Energy Economics
Global trade tensions are a major driver. Escalating tariffs between the U.S., China, and Europe are shrinking trade flows and industrial output—both key demand drivers for crude oil.
Notably:
- Every 5% tariff increase reduces oil consumption by 150,000–200,000 b/d.
- Chinese factory output has dropped 2.3%, hitting diesel demand.
- Container shipping volumes on Pacific routes are down 7.4%, with bunker fuel demand falling by ~85,000 b/d.
Strategic Response from OPEC+
OPEC+ is holding monthly meetings to stay responsive. Behind the scenes, internal tensions are rising Russia is prioritizing market share, while Saudi Arabia wants to keep prices near $80/b. Iraq and others with fiscal pressure are pushing for production growth, even as demand softens.
Be ready to pivot. OPEC’s flexible stance means supply forecasts may shift quickly. Procurement leaders should monitor updates from monthly meetings and assess their supply chain exposure accordingly.
Watch Brent and WTI spreads. The Brent-WTI differential narrowing to $3.70 indicates stronger U.S. demand relative to Asia—relevant for buyers managing transatlantic supply contracts.
Expect increased volatility. Options markets show a 68% chance of Brent trading within a $10/b range over the next 6 months. That’s a risk you’ll want to factor into 2025 budget models and contract clauses.
Upstream investment is slowing. New project decisions for ~1.2 million b/d are being delayed. Projects with break-evens above $65 are especially vulnerable, which could affect long-term availability.
Energy transition tailwinds. Investment in renewables is up 15% YoY. This may signal future shifts in energy sourcing strategies, especially for heavy industry procurement teams.
Regional Risk Factors
Procurement professionals should watch:
- China’s industrial data: PMI below 50 is a red flag for diesel and petrochemical demand.
- Summer demand spikes: Gasoline demand usually jumps 1.2–1.5 million b/d—any deviation will impact shipping and fuel contracts.
- Middle East volatility: 3.5 million b/d of supply comes from geopolitically sensitive zones—essential to factor into contingency sourcing.
Sector-Specific Impacts
Manufacturing
Lower diesel and feedstock prices may reduce input costs in the short term. However, future volatility could reverse gains—especially if tariffs or currency shifts continue. Manufacturing procurement teams should closely monitor chemical and plastic derivative pricing tied to oil markets.
Logistics & Transport
Falling bunker fuel prices could reduce ocean freight costs temporarily. However, if OPEC+ reverses course or shipping routes face disruptions, rates may rebound quickly. Logistics procurement leaders should ensure flexibility in contracts to manage fuel cost pass-throughs.
Energy-Intensive Industries
Refineries, chemicals, and materials producers may experience short-term margin improvements due to lower crude input costs. But with upstream project delays and potential supply tightness later in the year, forward hedging strategies may be warranted.
Final Word
This isn’t business as usual. OPEC+ is actively shifting strategy, and the effects ripple through every layer of the supply chain. Procurement leaders who monitor the signals—and build flexibility into contracts and sourcing—will be best positioned to manage cost and risk in the months ahead.
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