Crude Awakening: Oil Markets Slide into Tariff Turmoil

• Prices in Freefall: Brent crashed below $60 - the lowest in over 4 years - before rebounding to ~$65/bbl. WTI dipped to $55 amid tariff panic and OPEC+ surprise moves.

• Demand Growth Downgraded: 2025 oil demand growth slashed to 730k b/d (down 300k b/d), with further slowing to 690k b/d in 2026 as macro risks mount and EVs gain ground.

• Supply Stumbles and Surprises: Global supply rose 590k b/d in March, but 2025 growth is now seen at 1.2m b/d, revised down due to U.S. shale slowdown and Venezuela's slump. Offshore projects drive 2026.

• OPEC+ Overpromises: An announced 411k b/d output hike for May may fall flat, as many members are already overproducing and promising to cut back "later."

• Refining & Inventories: Margins slipped, especially in the Atlantic Basin. Inventories rose but remain near 5-year lows, with OECD product stocks down sharply - leaving little room for error if another shock hits.

---

After a stretch of relative calm, oil markets have been dragged back into chaos - this time courtesy of tariffs, a shaky macro outlook, and a surprise move by OPEC+ that’s left traders scrambling for Dramamine.

In March, oil prices took a sharp dive, and by early April, they’d nose-dived further. Brent futures dropped by more than $15/bbl - briefly crashing below $60, their lowest in over four years - before clawing their way back to $65 after some U.S. tariffs were delayed. WTI fared just as badly, freefalling to $55 before recovering slightly above $60. If the first two weeks of April were a ride, it was one of those malfunctioning rollercoasters that leaves you checking your insurance policy.

Tariff Troubles, Tight Margins, and Tempered Demand

While oil, gas, and refined products got a temporary hall pass from the new U.S. tariffs, that didn’t stop the broader panic. Investors worry the measures will inflame inflation, slam the brakes on growth, and push trade tensions into full-blown conflict. The fallout? A 400k b/d reduction in forecasted oil demand for the remainder of the year, and a new global demand growth estimate of just 730k b/d for 2025 - down 300k b/d from last month’s forecast. In 2026, the outlook softens further to 690k b/d as EVs and macro headwinds take the wheel.

This downgrade is particularly ironic considering Q1 2025 saw a surprisingly strong rebound in oil use - up 1.2m b/d year-over-year, the best since 2023. But macro anxiety moves faster than a Houston refinery rumour, and so the optimism didn’t last long.

Supply-Side Soap Opera

On the supply front, March saw a 590k b/d jump in global output, bringing total production to 103.6m b/d - up 910k b/d year-over-year, led by non-OPEC+ countries. But the real market jolt came when eight OPEC+ members decided to triple their previously planned May output hike to 411k b/d. That bold headline, however, is likely to underdeliver: countries like Kazakhstan (already 390k b/d over its target thanks to Chevron’s Tengiz expansion), Iraq, and the UAE are overproducing and have pledged to “compensate” in future months. Translation: we’ll see it when we believe it.

Adding more drama, U.S. shale producers are sounding alarms. The Dallas Fed Energy Survey shows firms need at least $65/bbl to justify new drilling - right around where prices are currently clinging. Toss in new steel tariffs and you get fewer rigs, slower growth, and a 150k b/d downgrade in expected U.S. supply growth for 2025, now pegged at just 490k b/d. But don't worry, Brazil, Guyana, and Canada are here to pump us through, with a combined 520k b/d of growth on deck next year.

All told, 2025 global supply growth has been revised down by 260k b/d to 1.2m b/d. For 2026, output is forecast to rise by 960k b/d, with offshore projects leading the way.

Refining Reality and Inventory Imbalance

Refiners aren’t having a great time either. Global crude runs are expected to average 83.2m b/d this year, with the projected annual increase now sliced by 230k b/d to just 340k b/d. In March, refining margins slipped in the Atlantic Basin but gained ground in Asia, particularly for sour crude in Singapore. Middle distillates were the party poopers, dragging profitability down across the board.

Inventories aren’t much more reassuring. Global observed oil stocks rose by 21.9 mb in February to 7,647 mb - but that’s still scraping the bottom of the five-year range. The build was largely driven by crude, NGLs, and feedstocks, while oil products fell by 19.2 mb, with a 34.2 mb draw in OECD stocks. Preliminary March data suggests further builds, especially outside the OECD and in oil on water.

Buckle Up: More Turbulence Ahead

So where does that leave us? Brent trading in the mid-$60s, demand forecasts dropping faster than refinery margins, and an OPEC+ that says one thing but pumps another. Add in trade negotiations on life support, EV market expansion, and the geopolitical roulette wheel, and you've got a recipe for volatility.

In short, oil markets are now dancing the tariff tango - lurching between bearish sentiment and fragile recovery, with no clear end in sight. One thing is certain: this isn’t a drill. The diesel truck that is the global economy is chugging uphill, and the road ahead looks steep, winding, and very slippery.

The information provided in this market insight is for general informational purposes and should not be considered financial advice. It is not intended to offer any financial recommendations or endorsements. Any decisions made based on the content are the sole responsibility of the reader.