- Saudi and UAE Crude Exports Rise, Offsetting Venezuela and Iran Cuts.
- Oil Markets Face Oversupply Risk as Brent Slides into Contango.
- OPEC+ May Fully Unwind 2.2m b/d Cuts by November.
OPEC+ leaders again surprised the oil market with another 411,000 barrels per day (b/d) of crude oil production in June, added on top of the prior agreement for May of 411,000 b/d, increasing the overall increment in Q2 2025 by 960,000 b/d. The majority of incremental supply is expected to originate from Saudi Arabia, reports Break Wave Advisors.
Saudi and UAE Exports Increase With Changing Trade Patterns
Saudi oil exports increased by 200,000 b/d in April, Vortexa reports. Preliminary May data indicate a decline, but it is too soon to determine a clear trend. Meanwhile, the UAE recorded a substantial increase in exports during early May, but once again, trends are premature due to the limited time frame of observation.
Declining Venezuelan and Iranian exports countered by an OPEC+ increase
The extra supply from OPEC+ is partially compensated by declining exports from sanctioned producers. Venezuela’s exports have fallen sharply, down from approximately 900,000 b/d in January to 500,000 b/d in April and only 300,000 b/d thus far in May, following PDVSA shutting out Chevron exports following the imposition of tighter US sanctions. Iran also witnessed its exports drop by 566,000 b/d in April over March due to the effect of fresh US pressure. Even with these declines, demand for compliant tankers is still relatively unchanged.
Brent in Contango as Oversupply Concerns Mount
Brent crude recovered to almost $62/bbl after OPEC+’s announcement, gaining $2/bbl as buyers took advantage of the price drop. Forward prices indicate a contango after Q3 2025, with prices falling to $59.70/bbl in October, indicating possible oversupply. This has led to heightened interest in onshore storage and floating tanker storage, especially for sanctioned oil. Chinese onshore inventories have increased since February but are still 4% lower than Q3 2023 levels.
OPEC+ Likely to Wind Down Cuts Completely by End of Year
Should current trends persist, OPEC+ will unwind its voluntary 2.2 million b/d cuts completely by October or November 2025. Saudi Arabia seems to be gearing up for a low-price environment over a long duration, driven by exasperation at non-compliance by members such as Kazakhstan and Iraq and the need to re-take market share from US shale.
Russian and Iranian Oil Sanctions Remain to Influence Tanker Demand
Lower prices for oil have increased the number of tankers that can lawfully ship Russian crude under the G7 price limit. Meanwhile, the prices provide western nations, particularly the US, with greater flexibility to aim at Russian and Iranian oil exports, further boosting demand for compliant VLCCs.
India Ramps Up US Crude Imports Ahead of Trade Talks
Indian refiners are stepping up US crude imports ahead of key trade negotiations with Washington later this month. Ship-tracking data suggest India will import 470,000 b/d of US crude in June, the highest since August 2023. April imports from the US rose by 85,000 b/d month-on-month, mostly transported on VLCCs.
This surge is caused by positive WTI prices and the spectre of US tariffs. A pending 26% tariff on Indian imports has been pushed back, and exporters are encouraging New Delhi to seal a bilateral trade agreement. India also ramped up Russian crude imports in April, though total crude imports fell 9.5% from March before partially recouping.
California Braces Refining Squeeze with 370k b/d Facility Due to Shut Down
Valero plans to close or convert its 145,000 b/d Benicia refinery by April 2026 and is weighing options for its 85,000 b/d Wilmington refinery. The closures follow the already announced closure of Phillips 66’s 139,000 b/d Los Angeles refinery in Q4 2025.
Together, California will lose 370,000 b/d of refining capacity, about 17% of the state’s total, over the coming year. Those closures will boost California’s dependence on imports of refined product, such as gasoline and jet fuel, from East Asia, and lower seaborne crude oil imports, at 1.4 million b/d in Q1 2025.
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Source: Break Wave Advisors
