The possibility of a Russia-Ukraine ceasefire, the move by OPEC+ to boost output, and the threat of tariffs on key economies are a confluence of bearish factors for oil markets.
For now, the market is reconciling to the fact that despite expectations of a decline in supplies from Iran, Libya and Venezuela, the disruption in exports from Kazakhstan and logistical issues in Russia, the growth in output in other key pockets amid sluggish demand would be enough to keep a lid on prices.
S&P Global Commodity Insights forecasts that global oil and liquids production will outpace demand throughout the year. Consequently, Platts Dated Brent is projected to average $73/b in 2025, lower than the $81/b average recorded in 2024, with further declines anticipated in 2026.
While Kyiv and Washington have said that Ukraine is ready to accept an immediate 30-day ceasefire with Russia, Russian President Vladimir Putin said that while he favored a 30-day ceasefire, there were “nuances” in moving ahead with an agreement. As the US piles pressure on Russia, a deal could potentially pave the way for sanctions relief and pause attacks on energy infrastructure.
However, should Moscow fail to move ahead with ceasefire negotiations, US President Donald Trump has threatened to use new, more punitive sanctions and tariffs to force it to the table.
That said, if US sanctions on Russian oil are eased, it would surely lower Russian crude oil trading costs but not, by itself, lead to more production. Russian crude oil production levels are determined more by the OPEC+ production policy and less by sanctions.
The removal of US sanctions could streamline supply chains by easing access to finance, lessen the need for ship-to-ship transfers and open up potential for more foreign upstream investment — all of which are bearish for prices in the foreseeable future.
More OPEC+ supplies on the way
At a time when expectations of a Russia-Ukraine peace deal have started to build, eight OPEC+ countries implementing a combined 2.2 million b/d of voluntary crude production cuts have decided to gradually ease them from April as planned, ending weeks of market speculation over whether the group saw the global economy on firm enough footing to add more oil supplies.
Some market participants had expected the group to postpone the easing of cuts for a fourth time. But the decision follows numerous requests by US President Donald Trump to boost crude output to bring down oil prices amid fears of tariffs and sanctions from the United States.
OPEC+ production is already on the rise, with many producers struggling to comply with their crude quotas, leading to a surge in production in February, when OPEC+ output rose by 440,000 b/d month over month to 40.98 million b/d, according to the latest Platts OPEC+ Survey from S&P Global Commodity Insights.
In addition, S&P Global Commodity Insights expects an average growth in non-OPEC+ crude and condensate production of 1 million b/d in 2025.
Big 3
The other key factor that the oil market is following closely is how the US, Saudi Arabia and Russia — the world’s three largest crude producers — might reconfigure the geopolitics of the global oil market. It’s a potentially paradigm-shattering move, as the three producers are now pursuing shared interests in oil and geopolitical matters.
They collectively account for nearly 40% of global crude oil production and wield great geopolitical influence. While oil price preferences are not aligned, S&P Global Commodity Insights expects dynamics among the “Big 3″—if the nascent improvement in US-Russian relations endures—to keep prices closer to what we see as US President Donald Trump’s preferred price range of $65-$75/b for West Texas Intermediate.
This time, there is a strong expectation that the dialogue on oil may last longer than the one in April 2020, when Trump helped to broker an OPEC+ supply cut with Saudi Arabia and Russia during the COVID-19-induced oil price collapse. If the US-Russian rapprochement is not derailed, the US under Trump would be involved in global oil matters at the highest levels with Saudi Arabia and Russia — a key theme to watch.
Economics, geopolitics
The consumption outlook may not offer anything dramatic for the market either. While US financial markets are expected to witness a period of turbulence in the foreseeable future, that could impact many other countries, China is staging a revival at a slower-than-expected pace due to the twin woes of a pandemic and a property market crash.
Commodity Insights anticipates that China’s oil demand will increase by 310,000 b/d in 2025, compared with a 189,000 b/d increase in 2024, with demand growth this year mainly driven by a robust appetite for petrochemical feedstock. Meanwhile, growth would slow to 140,000 b/d in 2026.
According to S&P Global Ratings, the highly uncertain environment poses risks to the global economy this year. US trade policy is a key swing factor that is affecting the outlook. Tariffs are expected to trigger higher inflation in the US and contribute to lower global growth, with smaller and more trade-oriented economies being affected relatively more.
In China, growth would be supported by a more expansionary fiscal policy, though stimulus efforts are likely to be moderate. More domestically oriented economies such as India and Japan would be more sheltered from external conditions, according to Ratings.
While most of the factors paint a bearish picture, oil markets won’t be able to ignore some developments that could support prices in the near term.
The US strikes on Houthi targets in North Yemen on March 15, followed by Yemeni counterstrikes on the US Navy on March 16, are seen as bullish for near-term oil price sentiment.
Northbound products trade, mainly originating from India and Saudi Arabia, could reduce, delaying arrivals into Europe and boosting freight costs. This could support European diesel prices and weigh on the East of Suez market. Southbound crude is primarily Russian and Mediterranean grades. With a higher risk and more expensive war risk insurance, crude price differentials in the Mediterranean would be pressured while delivered prices in Asia could find support.
Sambit Mohanty is Asia Energy Analyst at S&P Global Commodity Insights, leading coverage for Platts Oilgram News for the Asia-Pacific region. Sambit is based in Singapore and has more than 25 years of experience as a senior journalist and editor analysing commodities and energy trends in the region. He holds a Master’s Degree in Applied Economics.
