Crude oil prices experienced a slight dip last week, reflecting investor anxiety over a possible supply surplus later in the year. ANZ reported a shift in market sentiment driven by OPEC’s plans to unwind its 2.2 million barrels per day production cuts more rapidly than initially anticipated. Saudi Arabia has already boosted its output, with flows reaching 6.43 million barrels per day in the first half of the year. Concurrently, Russia’s crude exports have reached a one-month high, contributing to the growing global supply. ANZ analysts suggest that the accelerated production by key OPEC+ members could outstrip demand growth in the second half of 2025, heightening the risk of oversupply.
However, recent developments in Europe have injected additional volatility into the oil market. EU member states reached an agreement to lower the price cap on Russian crude as part of a wider package of sanctions intended to reduce Moscow’s energy revenues. These measures also target refined fuels produced from Russian oil, introduce further banking restrictions, and prohibit imports from a major oil refinery in India.
These sanctions are expected to tighten the diesel market, where global inventories are already at five-year lows. A persistent heatwave in Europe has also reportedly disrupted some refining operations, adding to the pressure. ANZ cautions that this situation could worsen as refiners shift toward lighter crudes, potentially limiting diesel output at a time when demand is increasing for the northern hemisphere’s harvest season.
Brent crude oil last traded down by 0.3 per cent to $US69.37 a barrel, reflecting the market’s sensitivity to these competing factors of supply increases and potential disruptions.
