A combination of demand worries, rising production from non-OPEC countries and impact being seen of geopolitical events (hope of some compromise in Russia-Ukraine, Israel Hamas Ceasefire) have already been keeping a tight lid on crude prices in recent months.
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ICICI Securities Report
Thanks to The Organization of the Petroleum Exporting Countries' decision to finally resume restoring some of the 5.85 mb/d of supply held back from the markets for the last couple of years, crude prices tumbled to $71/bbl yesterday, its lowest level in CY25 and second lowest in the last six months.
OPEC's (plus Russia) latest guidance pegs production to reach 32.3mb/d by Sep'26, from the Apri'25 target of 30.5, adding to the over-supply in the market over the next 12–18 months.
Lower crude prices, if fuelled by demand worries, do have the potential to adversely impact gross refining margins; but they also help oil marketing companies and gas companies via:
materially higher retail fuel margins; and
reduction in term LNG prices, expressed as a slope to Brent; and
lower input costs for petrochemical production.
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