- Oil prices rebound above $85/bbl amid rising geopolitical tensions, particularly in the Middle East and North Africa.
- Demand outlook remains fragile, with uneven economic recovery in China and persistent global macroeconomic uncertainties.
- Market caught between supply risk and weak consumption, creating a volatile landscape for traders and policymakers.
Global oil markets are facing an increasingly complex outlook as geopolitical tensions push prices higher, even as concerns about demand growth remain. The balance between supply-side risks and fragile consumption patterns is shaping a more volatile second half of 2025, reports Reuters.
Market caught between supply risk and weak consumption
Brent crude prices have recently seen an uptick, climbing back above the $85 per barrel mark. This rebound follows renewed instability in key oil-producing regions, including the Middle East and parts of North Africa. Market participants are closely watching developments around the Strait of Hormuz and other sensitive maritime chokepoints, as any disruption to flows could tighten global supply significantly.
At the same time, the demand picture remains mixed. While economic activity has picked up in some advanced economies, especially in the U.S. and parts of Europe, China’s recovery remains uneven. Manufacturing data from Asia continues to signal fragility, keeping a lid on broader oil consumption growth.
Analysts are also noting that inventory levels, particularly in OECD countries, are sitting near historical averages, giving some cushion but offering limited protection in the event of a sharp supply disruption. Additionally, ongoing production restraint by OPEC+ has contributed to a more supportive price environment, although questions remain about the group’s cohesion and long-term strategy.
Despite the recent price increases, traders remain cautious. Demand fundamentals are still weighed down by high interest rates, rising fuel efficiency, and a gradual energy transition in major economies. The International Energy Agency and other forecasters have flagged slowing demand growth in the years ahead, particularly in the face of aggressive climate policies and the electrification of transport.
Volatility remains a key theme. While the current geopolitical risk premium supports higher oil prices in the near term, market sentiment is vulnerable to economic data surprises and any signs of weakening consumption. Energy firms and policymakers alike are preparing for a landscape that could swing quickly between undersupply and demand destruction.
As the second half of 2025 unfolds, oil markets are likely to remain caught between two powerful forces — geopolitics and macroeconomics — making strategic positioning more important than ever for producers, traders, and consumers.
Did you subscribe to our daily Newsletter?
It’s Free Click here to Subscribe!
Source: Reuters
