Oil prices dipped midweek as market sentiment shifted in response to the International Energy Agency’s latest forecast, which indicated that global oil supply is set to outpace demand this year.
Brent crude futures slipped 41 cents, or 0.6 per cent, to $65.71 a barrel by mid-morning London time, while US West Texas Intermediate fell 50 cents, or 0.8 per cent to $62.67.
Analysts pointed to the combination of the American Petroleum Institute’s latest inventory data and the IEA’s softer demand outlook as key drivers of the downward move, even as the market awaits Friday’s meeting between US President Donald Trump and Russian President Vladimir Putin.
The IEA has raised its projections for oil supply growth in 2025 while trimming demand forecasts, citing weaker fuel consumption in major economies such as China, India and Brazil. However, the agency still expects global oil demand to grow by 680,000 barrels per day (bpd) in 2025 and 700,000 bpd in 2026, bringing total demand to around 104.4 million bpd. Growth in the second quarter came entirely from non-OECD countries, while consumption in the OECD was flat. Aviation has been a notable bright spot, with global jet fuel demand hitting record summer highs in the US and Europe.
Konstantinos Chrysikos of Kudotrade stated in a note to media that crude oil remained under pressure on Wednesday as the market awaited more US inventory data and the upcoming meeting between Trump and Putin. “The market was also reacting to the US crude stockpiles API data, which rose by 1.5 million barrels.” The unexpected rise in inventories could weigh on demand expectations in the US and leave market participants more cautious.
Daniela Sabin Hathorn, senior market analyst at Capital.com, stated that oil markets have entered a cautious “wait-and-see” mode ahead of the scheduled meeting between President Trump and President Putin in Alaska. Prices have stabilised after heavy losses since the start of August, with Brent crude holding firm around the $66 mark, while WTI hovers just above key support at $652 per barrel. This relative calm reflects investor hesitation to make big moves until the diplomatic outcome becomes clearer.
On the supply side, global output remained steady in July at 105.6 million bpd, with a drop in Opec+ production offset by an equivalent increase from non-Opec+ sources. Higher Opec+ targets from September will push global supply growth to 2.5 million bpd this year and 1.9 million bpd in 2026, with non-Opec+ producers contributing the largest share. Recent commitments by eight Opec+ members to unwind the 2.2 million bpd of voluntary cuts by September will add 547,000 bpd in the coming month. Non-Opec+ supply will be bolstered by US natural gas liquids, Canadian crude, and offshore production in the US, Brazil and Guyana.
Opec’s own monthly oil report this week made no changes to its 2025 demand and supply outlook, but raised its 2026 demand growth forecast by 100,000 bpd to 1.38 million bpd, while lowering non-Opec+ supply growth for that year. This points to a tighter market over the medium term. The US Energy Information Administration, meanwhile, slightly increased its crude oil production estimate for 2025 to 13.41 million bpd, though it expects output to decline by 130,000 bpd in 2026 amid reduced drilling activity.
While the near-term supply outlook is comfortably balanced, geopolitical factors continue to cloud the longer-term picture. The US has introduced its most significant Iran-related sanctions since 2018, aiming to restrict Tehran’s ability to sell oil, while pressing major buyers of Russian crude, notably India, to scale back imports. The European Union is preparing a ban on oil products refined from Russian crude starting in January 2026, along with a lower price cap on Russian oil from September this year. At the same time, Washington has eased restrictions on Venezuela, with Chevron granted a new licence to operate and export oil.
Oil prices have remained relatively stable in recent months, with Brent crude hovering near $70 a barrel in July, reflecting low market volatility. However, early August saw prices fall to around $67 following Opec+’s announcement to fully unwind production cuts. Market watchers say the interplay between rising supply, uneven demand growth, and the impact of sanctions will be pivotal in determining price trends for the rest of 2025 and into 2026.
