Oil prices are poised to end the week on a positive note, reversing the discouragement that dominated the market earlier this year.
Brent crude for May delivery traded at $73.67 per barrel in the latest session, nearly $2 higher than a week ago, while WTI hovered at $69.67 per barrel, also up $2 from the previous week. This marks a $5-per-barrel recovery from the early-month lows.
Market outlook and rig count trends
A recent Dallas Fed Energy Survey indicated a slight increase in oil and gas sector activity in Q1 2025, but company outlooks remain cautious. The index fell by 12 points to -4.9, signaling lingering concerns among energy firms.
Meanwhile, U.S. rig counts have remained within a narrow range for 41 consecutive weeks. According to Baker Hughes data, the total U.S. rig count fell by one week-over-week (w/w) to 486, with the Permian Basin count declining by one to 300.
Drilling in the Texas portion of the Delaware Basin dropped by three rigs, reaching a three-year low of 62. However, the U.S. gas rig count rose by two to 102, with Haynesville and Marcellus remaining stable at 30 and 26 rigs, respectively.
Analyst outlook: No surplus, potential deficit ahead
Commodity analysts at Standard Chartered report a growing bullish outlook in oil markets, largely due to the absence of feared supply surpluses. Instead, a potential supply deficit looms, with StanChart predicting demand will exceed supply by 0.9 million barrels per day (mb/d) in Q2 and 0.5 mb/d in Q3.
By contrast, the U.S. Energy Information Administration (EIA) offers a more conservative outlook, forecasting demand to outstrip supply by just 0.1 mb/d in Q2, with a balanced market expected in Q3. Both institutions anticipate a slight inventory draw across 2024 and 2025.
Global oil demand remains strong
StanChart data indicates global oil demand averaged 102.77 mb/d in January, marking a 2.19 mb/d year-on-year increase. The March 19 JODI release supports this assessment, with the EIA estimating demand at 102.74 mb/d—a growth rate of 1.85 mb/d.
While January typically sees seasonal demand dips, StanChart expects demand to surpass 105.0 mb/d for the first time in June, peaking at 105.6 mb/d in August 2025.
U.S. oil production growth expected to slow further
The dramatic slowdown in U.S. oil production growth observed in 2024 is expected to continue into 2025 and 2026. StanChart forecasts U.S. liquids growth will decline from 734 kb/d in 2024 to 367 kb/d in 2025, and further to just 151 kb/d in 2026.
Non-OPEC+ supply growth has already dropped sharply, falling from 2.46 mb/d in 2023 to 0.79 mb/d in 2024. Analysts attribute this primarily to a significant reduction in U.S. total liquids growth from 1.605 mb/d in 2023 to 734 kb/d in 2024.
With oil prices rebounding, demand remaining robust, and supply constraints emerging, market sentiment appears to be shifting toward a more bullish outlook. However, uncertainties around production trends and geopolitical developments will likely continue to influence price movements in the months ahead.
