Why are the oil prices decreasing?

The current decrease in oil prices can be attributed to several key factors, which are largely driven by a combination of supply and demand dynamics.

Diminishing Demand

• Global oil demand growth is showing signs of softening, particularly driven by weaker projections for oil demand in China and other regions. China's economic growth has slowed more than anticipated, raising concerns about its ability to maintain previous levels of oil consumption123.

Strong Supply

• Global oil production has remained robust, despite geopolitical uncertainties. Growth in North American shale oil production and increased production in other regions, such as southern Iraq and Russia, have contributed to ample oil supply. This has led to a glut in the oil market, putting downward pressure on prices23.

Inventory Levels

• Increasing oil inventories are another significant factor. As global oil production outpaces demand, inventories are accumulating, which acts as a buffer against potential short-term supply disruptions and further depresses oil prices23.

Economic Growth

• The economic growth in major economies, such as the United States, has slowed down. The U.S. experienced a modest 1% annualized GDP growth in the first quarter of 2024, the slowest pace since the second quarter of 2022. This slowdown contributes to weaker oil demand and lower prices1.

OPEC+ Production Dynamics

• Although OPEC+ has extended production cuts, which initially led to some upward price pressure, the expectation is that these cuts will be relaxed in the second quarter of 2025. This anticipated increase in production, combined with production growth from non-OPEC+ countries, will further contribute to the downward pressure on oil prices3.

In summary, the decrease in oil prices is primarily driven by softening global demand, robust oil supply, increasing inventories, and the expected relaxation of OPEC+ production cuts.