Price Performance Summary

In the early part of the first week, oil prices traded with a bearish bias amid the fading of geopolitical risk premiums and weak demand data. Subsequently, an unusual inventory build reported by the EIA and refinery utilization rates falling short of seasonal norms—combined with concerns over a slowing global economy—pushed prices lower. Later in the week, although demand headwinds persisted, rising risks to energy infrastructure related to the Russia–Ukraine conflict and escalating tensions between the U.S. and Venezuela supported a modest rebound.

In the early part of the second week, prices fell after Iraq restored output at the West Qurna-2 oilfield. Mid-week, U.S. seizures of Venezuelan oil tankers briefly lifted supply concerns, but weak refined product data dominated, keeping prices under pressure. Even the realization of a Federal Reserve rate cut failed to reverse the downward trend.

Agency Reports: IEA Narrows the Supply–Demand Gap; EIA and OPEC Maintain Existing Narratives

Supply–demand forecasts from the three major agencies this month:

EIA

In its latest Short-Term Energy Outlook, the EIA slightly raised its forecast for global oil supply growth in 2025 and lowered its projection for 2026, mainly reflecting continued record-high U.S. crude production. On the demand side, modest upward revisions to China’s GDP growth outlook led to small increases in projected global oil demand growth for 2025–2026. With only limited adjustments to the supply–demand balance, the EIA kept its oil price outlook broadly unchanged from the prior month, indicating no clear directional shift in the near-term price outlook.

OPEC

OPEC’s latest monthly report shows that, supported by resilient global economic performance year-to-date, ongoing fiscal stimulus in major economies, relatively accommodative monetary conditions, and easing trade-related uncertainty, its forecast for global economic growth in 2025 was nudged up by 0.1 percentage point to 3.1%, while the 2026 projection was left unchanged at 3.1%. On oil fundamentals, OPEC maintained its forecasts for global oil supply and demand growth in 2025, noting that demand momentum continues to be driven mainly by non-OECD economic activity and petrochemical demand. Supply growth in 2026 is expected to be led by Brazil, Canada, the United States, and Argentina. OPEC also emphasized that, against a backdrop of relatively low OECD crude inventories, rising refinery runs, and subdued refined product cracks, recent physical market fundamentals have continued to provide some support to oil prices.

IEA

In its latest report, the IEA cited improving macroeconomic prospects and the fading of tariff-related uncertainty as reasons for raising its global oil demand growth forecasts for 2025 and 2026, while simultaneously trimming its supply growth outlook. This reflects the continued impact of sanctions on Russia and Venezuela, which are constraining exports and modestly narrowing the projected global supply surplus next year. The IEA also noted that global oil supply fell by 610 kb/d in November, with OPEC+ accounting for more than three-quarters of the decline, primarily due to sanctioned volumes from Russia and Venezuela. In November, Russian crude exports fell by 420 kb/d, and together with weaker oil prices, this reduced Russia’s oil revenues to USD 11 billion, down roughly USD 3.6 billion year over year.

Oil Market Data Update

Higher Refinery Runs Support Crude Draws, but Refined Product Inventories Build Sharply

Over the past two weeks, U.S. commercial crude inventories declined by a cumulative 1.2 million barrels, suggesting active refinery crude intake and providing some support on the crude side. The SPR increased by roughly 0.5 million barrels, extending replenishment efforts, albeit at a slightly slower pace. Refined product inventories, however, continued to build sharply, with gasoline and distillate stocks rising by 10.9 million barrels and 4.6 million barrels, respectively, underscoring weak end-user demand and a lackluster peak season. On the supply side, refinery utilization rose another 2.2 percentage points to 94.5%, returning to pre-maintenance levels and supporting near-term crude processing demand. Upstream investment appetite remains cautious: while the active rig count edged up by seven rigs, it remains low, and fracturing activity continues to decline, suggesting that U.S. crude production is unlikely to expand meaningfully in the near term.

Weekly Commentary

Overall, the tone of this month’s agency reports was neutral. The EIA and OPEC largely reiterated prior views, while the IEA further narrowed its assessment of the global supply–demand gap and has now raised its demand forecast for a second consecutive month, signaling a gradual reassessment of previously conservative demand assumptions. Although a roughly 2 mb/d gap remains between IEA and OPEC demand projections, the narrowing discrepancy improves the reliability of medium-term supply–demand assessments. The IEA’s reference to an increase of around 213 million barrels in floating oil storage mainly reflects sanctioned crude being temporarily held at sea due to trade and compliance constraints. With key onshore inventories such as U.S. commercial crude stocks still relatively low, the actual pressure on the oil market is limited and should not be overinterpreted. On the sanctions front, U.S. measures have materially constrained Russian crude exports, while OPEC+ has not deployed spare capacity to offset the shortfall, resulting in tighter available supply than previously expected and providing near-term support to prices.

From a fundamental perspective, U.S. refined product demand has weakened recently, with signs that the peak season has underperformed. Historically, however, delayed winter demand is common and often coincides with seasonal draws in commercial crude inventories and rising refinery utilization. This suggests that part of the recent weakness in refined products reflects a temporary increase in refinery run rates. On the monetary policy side, three rate cuts have already been delivered this year. Historical experience suggests that refined product consumption and production data typically improve around three months after rate cuts, with more visible impacts on commercial inventories emerging after about six months. This implies that upcoming data may begin to reflect the effects of the September rate cut, warranting continued monitoring.

Conclusion

In the near term, the oil market remains constrained by weaker-than-expected refined product demand, keeping price structures soft. However, with sanctions continuing to limit available supply, OPEC+ maintaining restraint, and upstream investment appetite subdued, downside risks appear relatively contained. Overall, in the absence of a clear demand catalyst, oil prices are more likely to trade sideways at lower levels rather than embark on a sustained rebound.