Looking ahead, global oil demand is expected to rise by 720,000 b/d in 2026, reaching 104.4 million b/d.
Meanwhile, global oil supply surged by 950,000 b/d month-on-month in June to 105.6 million b/d, led by Saudi Arabia. Year-on-year, supply grew by 2.9 million b/d, with OPEC+ contributing 1.9 million b/d. With OPEC+ having raised its production targets for August, total global supply is forecast to grow by 2.1 million b/d this year, reaching 105.1 million b/d, and expand further by 1.3 million b/d in 2026. Non-OPEC+ producers are expected to drive this growth, adding 1.4 million b/d this year and 940,000 b/d in 2026.
Refinery activity is also ramping up. After a 1.7 million b/d rise in June, global refinery throughputs are projected to climb another 2 million b/d over July and August, peaking seasonally at 85.4 million b/d. On an annual basis, refining runs are set to increase by 500,000 b/d in 2025 and by 460,000 b/d in 2026, averaging 83.3 million b/d and 83.8 million b/d, respectively.
While refining margins dipped in June due to higher crude prices, they rebounded in early July, buoyed by stronger diesel margins.
Inventory Build Raises Supply Concerns
Global observed oil inventories rose sharply by 73.9 million barrels (mb) in May to 7,818 mb. This increase was driven largely by higher commercial product inventories in OECD countries and a notable build-up of crude in non-OECD nations. Crude, natural gas liquids (NGLs), and feedstocks rose by 49.7 mb—marking the fourth consecutive monthly increase—largely due to a surge in Chinese stockpiles. Oil product inventories also rose for the first time in 2025, adding 24.2 mb.
Preliminary data for June indicates further stock builds, particularly in floating storage and non-OECD countries.
Price Volatility Amid Geopolitical Risk
North Sea Dated crude climbed $7 per barrel in June to average $71.35/bbl, fluctuating within a $65–$80/bbl range. Prices spiked mid-month following Israeli airstrikes on Iranian military and nuclear sites, briefly pushing Dated crude above $80/bbl. However, markets calmed after a ceasefire was agreed. As of early July, prices hovered just above $72/bbl—still $15/bbl below levels seen a year ago.
This volatility occurred despite apparent oversupply. Global oil production in June stood 2.9 million b/d higher than a year earlier. On July 5, OPEC+ announced a surprise increase in production targets for August by 550,000 b/d, effectively reversing 80% of the 2.2 million b/d voluntary cuts introduced in 2023. Reports suggest a similar increase may follow in September, potentially restoring the entire volume a year ahead of schedule.
Mismatch Between Supply Growth and Demand
The production surge starkly contrasts with subdued demand growth forecasts of just 700,000 b/d for 2025 and 720,000 b/d for 2026. However, seasonal trends—such as increased refinery activity to meet summer travel demand and a doubling of crude burning for power generation to around 900,000 b/d—are expected to temporarily tighten the market.
Price indicators suggest a more constrained physical oil market than supply balances might imply. Prompt time spreads remain in backwardation, and refinery margins are relatively strong, despite implied stock builds of 1.74 million b/d in Q2 2025.
Nonetheless, these builds are concentrated in specific areas. U.S. gas liquids inventories rose by 79 mb in Q2, driven by robust domestic NGL output and reduced exports stemming from a temporary licensing requirement on ethane. China added 82 mb of crude oil to its reserves—an average of nearly 900,000 b/d—under a new policy that positions oil firms as strategic storage partners, effectively removing these volumes from the global market. This trend is expected to continue, and the pace of Chinese stockpiling could play a key role in shaping market balances in the months ahead.
OPEC+ Production Overview – June 2025
OPEC+ production increased to 42.75 million b/d in June, with the core OPEC-9 nations contributing 23.18 million b/d—1.39 million b/d above target. Saudi Arabia led with 9.8 million b/d, surpassing its target by 430,000 b/d. Iraq, Kuwait, and the UAE also exceeded their quotas. Among non-OPEC members, Russia produced 9.19 million b/d, slightly above its implied target.
Total sustainable capacity for OPEC+ stands at 48.36 million b/d, indicating an effective spare capacity of 4.44 million b/d as of June.
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