Positive Signals, Poor Sentiment Muddle Demand Outlook

Predicting oil demand growth in 2025 has grown increasingly difficult as markets are pulled between signals of underlying strength and extensive geopolitical and economic uncertainties. Trade in Brent futures in the first quarter saw more producers hedge output and more speculators bet on lower prices, reflecting bearish anxiety. Some physical oil traders also complain that the volume and unpredictability of the news flow, from Ukraine to tariffs, have made the market much harder to trade. As a US-led global trade war ratcheted up, as sanctions and other threats to supply increased and as fears of a US or global economic recession rose, benchmark grades responded by largely treading water through a tumultuous first quarter. That shifted toward clearer bearish signals late this week, when US President Donald Trump’s sweeping tariffs announcement combined with a surprise Opec-plus supply announcement pushed benchmark Brent crude prices down by some $5 per barrel in a day. “This kind of volatility we are seeing, which is tweet-driven or is missile-driven, based on who is breaking what ceasefire, is very difficult for us to trade around,” Jeff Webster, CFO of trading giant Gunvor, told a conference last week. Jeff Dellapina, CFO of Vitol, another trading house, said heightened tariff and geopolitical uncertainties have pushed risk capital away from commodity markets. Statements by Trump “can overwhelm any of the research we do,” he said. Before this week’s plunge, Brent had returned to $75/bbl, where it ended last year, after a strong January and weak March. Geopolitical events, such as tighter US measures against Venezuelan, Russian and Iranian oil trades, are providing an immediate prop for prices, but tariff-related concerns are now pulling hard in the opposite direction — exacerbating existing structural problems in China and Europe and eroding consumer confidence. Complicating matters, a weakening dollar — amid growing concerns about the US economy — could serve to stimulate some demand in emerging markets, the source of nearly 90% of demand growth today, by mitigating the cost of dollar-denominated oil imports.