February 2025 saw a pronounced selloff in crude oil prices, with ICE Brent and NYMEX WTI front-month future contracts retreating sharply to this year lows amid a confluence of geopolitical shifts, trade policy concerns, and weakening macroeconomic indicators.
EXECUTIVE SUMMARY
February 2025 saw a pronounced selloff in crude oil prices, with ICE Brent and NYMEX WTI front-month future contracts retreating sharply to this year lows amid a confluence of geopolitical shifts, trade policy concerns, and weakening macroeconomic indicators. The ICE Brent nearest crude future ended the month at $72.07 per barrel on February 26, marking a 4.8% decline from the $75.67 per barrel settlement on January 31. Meanwhile, the NYMEX WTI crude active future saw a steeper 5.4% month-to-date drop, settling at $68.62 per barrel on February 26, compared to $72.53 per barrel at the start of the month. On a monthly-average basis, Brent stood at approximately $75.00 per barrel in February, down from $78.12 per barrel in January, reflecting a 4.5% month-over-month decline. WTI averaged $71.34 per barrel, compared to $75.10 in January, a 5.1% drop. The dominant market forces throughout the month were the interplay between supply concerns—driven by OPEC+ policy uncertainties, U.S. sanctions on Iran, and the prospect of higher Russian exports—and demand-side fears exacerbated by weak economic indicators from major consumer regions.
As we enter March 2025, the sentiment on the crude oil market remains decisively bearish with the risk remaining tilted to the downside, with the possibility of crude prices testing even lower levels in the coming weeks. The outlook for March will largely hinge on OPEC+ decision to start a planned gradual phase-out of voluntary production cuts in April, as intensified demand-side concerns have already raised rumors that the participating states may agree to postpone the start of their exit strategy once again. Geopolitical developments will remain another very important factor for the crude oil market. The potential for peace talks between Russia and Ukraine means that sanctions on Russian oil exports may be lifted, which would inject additional supply into the market and put further downward pressure on prices. On the other hand, a lack of progress in the peace talks and/or new sanctions on crude oil exports from Russia, Iran and Venezuela may support crude prices and improve the sentiment on the market. Finally, global macroeconomic news will be the third area of hopes and concerns for market participants as growing macroeconomic headwinds were one of the major reasons of the recent selloff in crude prices. Although the overall picture looks rather grim, we still believe that crude oil prices have good chances to hold above a $70 threshold as for the Brent grade. And despite March 2025 promises to be another difficult and volatile month on the crude oil market, we confirm our previous recommendation to buy dips on the crude oil market, considering current levels both in Brent and WTI futures as good opportunities to start accumulating long positions.
World oil supply plunged in January 2025 950 thousand barrels per day (kbd) to 102.7 million barrels per day (mbd), according to the data of the International Energy Agency, as seasonally colder weather hit North American supply, compounding output declines in Nigeria and Libya. The supply was nevertheless 1.9 mbd higher than a year ago, with gains led by the Americas. Fresh US sanctions on Russia and Iran roiled markets at the start of the year but they have yet to materially impact global oil supply. Iranian crude oil exports are only marginally lower while Russian flows, so far, continue largely unaffected. So, global oil supply is on track to increase by 1.6 mbd to 104.5 mbd in 2025, with non-OPEC+ producers accounting for the bulk of the increase if OPEC+ voluntary cuts remain in place.
The U.S. Energy Information Administration, meanwhile, reported a much less severe contraction of global oil production in January 2025. According to this agency, the worldwide output declined by just 147 kbd compared with the previous month, representing a marginal 0.1% MoM decrease that marked the lowest level of output in the past three months and continued a two‐month downward trend. At the same time, year‐on‐year figures told a more encouraging story with a 2.25 mbd increase, or a 2.2% YoY gain, making it the fastest annual growth rate in 13 months. Furthermore, when measured against the five-year average for January, the global production surpassed historical norms by 4.17 mbd, representing a 4.2% increase.
OPEC overall crude oil output experienced a slight contraction in January 2025 on a month-over-month basis, according to cartel’s own data, with production declining by 63 kbd—a 0.2% MoM drop that ended a three-month streak of increases. This decline marked the steepest monthly pullback in the recent 4-month period, even as the year-on-year figures told a different story. Over the past year, the production grew by 336 kbd, or +1.3% YoY, the fastest annual increase seen in over 22 months. Nevertheless, when benchmarked against the five-year average for January, the output still has lagged by 350 kbd, amounting to a 1.3% shortfall. The OPEC+ alliance confirmed on 3 February that it plans to start unwinding voluntary cuts from April 2025, as it was agreed on the last semi-annual meeting. According to the schedule, these voluntary cuts will be phased out from the end of March 2025 through September 2026.
While the overall January 2025 crude oil production for the OPEC as a whole was officially reported at 26.68 mbd, the IEA and EIA estimates stood at 26.96 mbd and 26.92 mbd respectively. This translates into absolute differences of +282 kbd for the IEA and +242 kbd for the EIA relative to the OPEC figure, representing percentage premiums of roughly 1.06% and 0.91%. The average deviation across the assessments of these two vendors for the month was about 262 kbd. While the aggregated OPEC figures exhibited relatively minor percentage differences between the three data vendors, the country-specific analysis revealed pronounced variances in estimates of crude oil production in certain key countries. The substantial upward revisions in Iraq, the marked understatements in Nigeria and Libya, and the divergent views for Iran and the UAE illustrate that despite overall alignment, considerable heterogeneity persisted at the country level.
Total non‐OPEC oil production experienced a modest month‐over‐month decline in January 2025, with the overall output falling by 0.37 mbd, implying a 0.5% MoM drop that marked the lowest level of supply in 8 months. Despite this short‐term setback, year‐on‐year comparisons revealed a contrasting narrative: the production increased by 1.42 mbd from a year ago, representing a 2.1% YoY gain and the fastest annual growth rate in 8 months. When measured against the five‐year average for January, the reported output stood 3.21 mbd, or +4.8%, above typical levels. While the aggregate data pointed to a minor monthly contraction, the longer-term figures underscored underlying growth dynamics that vary considerably by region. Several major non-OPEC oil producers recorded diminishing total oil output in January 2025, with the United States leading the pack in terms of short‐term production contraction. Among others, Brazil, Angola, and Mexico also registered significant declines within the month, albeit much less serious comparing to the U.S.
Total U.S. oil production registered a notable monthly drop in January 2025, with the overall supply declining by 454 kbd from the month prior, representing a 2.0% MoM decrease that brought the production to its lowest level in the past 4 months. This significant monthly contraction in the U.S. total output was driven by simultaneous decrease in all major components of the supply. Despite this short-term pullback, annual figures revealed a robust expansion; the output still increased by 1.54 mbd, or +7.3% YoY, compared to the same month in the previous year. Moreover, when benchmarked against the five-year average for January, the reported production exceeded historical norms by 2.52 mbd, underscoring a significant long-term upward trend.
Despite the deeply negative monthly dynamics of the overall crude oil supply in the country, the U.S. shale oil production exhibited modest month-over-month expansion while achieving a new record production level. The supply increased by 23 kbd, representing a slight 0.2% MoM growth, yet this increment pushed the output to the new highest level recorded over the history of 10.67 mbd. Although the pace of monthly growth was the slowest seen in the recent 4-month period, the trend has been consistently upward for that duration. On a year-over-year basis, the production advanced by 1.13 mbd, marking an 11.8% YoY increase relative to the same month last year. Furthermore, when compared with the five-year average, the U.S. shale oil output exceeded historical norms by 1.74 mbd, which is higher by 19.5%.
The International Energy Agency revised marginally higher its forecast for global oil demand growth this year in January, to 1.1 million barrels per day (mbd), following a slight downgrade of 2024 growth to 870 thousand barrels per day (kbd). Weaker-than-expected 4Q24 demand came despite a drop in temperatures, which affected all OECD regions as well as China. US November deliveries were particularly weak, contracting by 510 kbd year-on-year, their steepest fall since June. China will marginally remain the largest source of oil demand growth in 2025, even as its share of the global increase slumps to 19%, compared with 60% in the preceding decade, driven entirely by the petrochemical sector. India and other emerging Asian economies provide an increasing share of growth, contributing a combined 500 kbd. In turn, OECD demand is forecast to return to structural decline following a modest increase last year.
Meantime, the U.S. Energy Information Administration (EIA) reported a weakening of global oil consumption in January 2025, which fell by 1.88 mbd relative to the month prior, a 1.8% MoM decline that marked the lowest level of demand over the past three months and ended a two‐month period of consecutive increases. This drop represented the fastest monthly decline in the past 12 months. Yet, on an annual basis, the global demand showed resilience, with consumption rising by 2.12 mbd (+2.1% YoY), marking the steepest year‐on‐year growth in 15 months and extending an 8‐month upward trend. Moreover, when compared to the 5‐year average for January, global oil use stood 5.96 mbd above the average—a 6.2% increase that underscores longer‐term demand strength. Both OECD and non‐OECD regions experienced significant month‐on‐month setbacks that disrupted recent upward trends.
Global observed oil stocks fell 17.1 million barrels (mb) month-on-month to 7 647 mb in December 2024, according to the most recent data of the International Energy Agency (IEA), as crude oil stocks plunged by 63.5 mb and products stocks rose by 46.4 mb. OECD total commercial oil inventories continued to decline as well, falling by 26.1 mb to 2 737.2 mb, 91.1 mb below their five-year average for this month of a year. Preliminary data show global stocks falling a further 49.3 mb in January, led by a large crude stock draw in China.
Meantime, in November 2024, detailed data on which were released by the IEA, total OECD oil inventories edged up by 0.5 million tons from the previous month, recording a modest 0.1% MoM increase that ended a two-month decline. This rebound represented the fastest month‐on‐month growth in the last three months, while the year‐over‐year change of 0.6 million tons, also a 0.1% YoY increase, reversed a 4-month downward trend to mark the quickest annual growth in the past 5 months. Despite these gains, the overall stocks remain 41.5 million tons below the five-year average for November, equivalent to a shortfall of 8.2%, highlighting a persistent tightness in OECD oil inventory levels.
U.S. total inventories of oil contracted in January 2025 by 10.61 mb from the previous month, posting a decline of 0.7% MoM, resulting in the lowest stock level observed over the last 9 months. Yet, on an annual basis, the inventories increased by 29.49 mb, or +1.9% YoY, marking the fastest year-over-year growth in the past 5 months and extending an upward trend for 9 consecutive months. When compared to the 5-year average for the first month of a year, however, the total stockpiles stood 160.09 mb lower, representing a 9.0% drop. The January 2025 data revealed contrasting trends between strategic and commercial stockpiles of oil in the United States, as the overall decline within the month was driven solely by dynamics of the latter.
Meantime, the crude oil inventory levels at Cushing, Oklahoma, underwent a more pronounced contraction in January 2025, with reported stocks declining by 1.59 mb from the previous month, posting a 7.1% MoM drop that has driven the facility to its new lowest levels in 10 years. This marked downturn reflected a sustained pattern, as the monthly figures have been on a downward trajectory for three consecutive months, culminating in the fastest month-over-month rate of decline observed over the past 4 months. Last time the volume of crude oil stored at Cushing was lower in the autumn of 2014. The year-over-year comparison further underscored the severity of the drawdown at Cushing, with the inventories falling by 7.15 mb compared to the same month last year—a 25.4% YoY reduction that confirms the persistence of the negative trend over recent quarters. Moreover, when benchmarked against the 5-year average for January, the reported inventories were 15.46 mb lower, equating to a 42.5% shortfall.
Global floating oil inventories experienced a modest monthly rebound in January 2025. The overall stocks increased by 4.92 million barrels (mb), representing a 7.2% rise from the previous month, and reached their highest level in 6 months. However, despite this month-on-month recovery, year-over-year figures revealed a decline of 4.18 mb, or -5.4% YoY, continuing a 16-month downward trend, albeit it was the slowest annual depletion of the stocks over the last 8 months. When compared with the five-year average for this month of a year, the global stocks lagged by 11.02 mb, implying a deficit of 13.0%.
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