Crude oil prices declined throughout August, driven by oversupply and weakening demand. Brent averaged $68-70/bbl in early August but fell to $67.45/bbl by the end of the month, down 6.93% for the month. WTI also dropped to $64.01/bbl, a 8.56% decrease. Prices are now near the lowest levels since late 2021 and are down 12% year-over-year.
Global oil supply increased due to OPEC+’s voluntary production cuts being fully unwound by September. The IEA forecasts 2.5 mb/d growth in 2025, with non-OPEC+ producers leading the way. US shale output reached 13.6 mb/d by December. However, demand growth was weak, with global consumption rising only 600 kb/d year-over-year, driven by non-OECD regions. OECD demand remained flat, and the IEA revised growth projections downward. Aviation fuel demand remained strong due to summer travel.
US trade policies and tariffs, along with geopolitical tensions, weighed on demand. As OPEC+ countries finalize the 2.2 million b/d unwinding next month, Saudi Arabia is expected to cut Asia-bound October formula prices by $0.50-0.70 per barrel in line with easing Dubai time spreads and waning demand as Asian refiners start seasonal maintenance.
LA Refinery Closure: Phillips 66’s 140,000 b/d Los Angeles refinery will close next week.
Mexico’s Dos Bocas Refinery: The 340,000 b/d refinery is offline due to a power outage.
South Korea’s Petrochemical Cuts: Small and stand-alone naphtha crackers are being phased out, with YNCC bearing the cost.
Global oil supply held steady at around 105.6 mb/d in July (latest full-month data), but August saw upward revisions due to OPEC+’s aggressive output hikes. The IEA now forecasts 2.5 mb/d of global supply growth for 2025, led by non-OPEC+ producers (1.3 mb/d from the US, Canada, Brazil, and Guyana) and OPEC+ adding 1.1 mb/d. OPEC+ effective production rose by 630 kb/d in September alone, with overproduction in countries like Kazakhstan, Iraq, and Russia offsetting some compensatory cuts. Non-OPEC+ output continues to surge, with US shale reaching record highs near 13.6 mb/d by December, though low prices may curb drilling later. Vitol is loading its first cargo of Syrian crude since US sanctions were lifted.
Refinery runs hit a seasonal peak of 85.6 mb/d in August, supported by strong margins (15-month highs in July), but throughput forecasts for 2025 were raised slightly to 83.6 mb/d. Trade tensions and tariffs weighed heavily, with US policies on China, India, and others curbing economic activity and demand. Geopolitical risks (e.g., sanctions on Russia/Iran, Middle East unrest) provided brief support but were overshadowed by the supply glut – IEA projects a 3 mb/d surplus in 2026, potentially the largest since the 2020 pandemic. EIA forecasts Brent at $58/bbl in 4Q25 and low-$50s in early 2026, with inventory builds exceeding 2 mb/d. Refining margins remained healthy amid summer demand, but the unwind of cuts and lackluster non-OECD growth signal persistent bearish pressure unless disruptions (e.g., tighter sanctions) intervene. Overall, August highlighted a well-supplied market shifting toward oversupply, with prices reflecting subdued demand amid economic headwinds.
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