What's Affecting Oil Prices This Week? (June 2, 2025)

The price of Brent crude ended the week at $63.35 after closing the previous week at $64.44. The price of WTI ended the week at $60.94 after closing the previous week at $61.20.

During May, oil prices got a boost stemming from optimism that the tariff situation was getting closer to being resolved, but with no actual deals yet in place, the momentum around oil prices has dwindled. Meanwhile, there are growing concerns about the increasing possibility of supply growth substantially outpacing demand growth in light of the recent announcements by members of OPEC+. On May 31, members of OPEC+ agreed to increase supply by 411,000 bbl/d in July. At the previous OPEC+ meeting that took place on May 3, members of OPEC+ agreed to increase supply by 411,000 bbl/d in June after increasing supply by a similar amount in May, which was three times the amount previously indicated. OPEC+ is also indicating that a similar level of supply increase will take place in August, September and October – unless the chronic over-producers (including Kazakhstan, Iraq and Russia) not only comply with previously agreed quotas but also reduce supply further to account for early oversupply. If OPEC+ moves forward with the accelerated plan, the unwinding voluntary cuts of 2.2 MMbbl/d will be completed in November of this year, instead of September 2026, which was agreed to last December.

The IEA is forecasting that oil demand growth in 2025 will only be 740,000 bbl/d. In comparison, Stratas Advisors is forecasting that demand growth for 2025 will be 1MMbbl/d. Regardless, if OPEC+ moves forward with unwinding previous supply cuts at the accelerated pace now being indicated, there will be significant downward pressure on oil prices – unless there are cuts from other producers, most likely U.S. shale oil producers. It is still possible that OPEC+ will moderate its supply increases because of weakness in oil demand or because the overproducers within OPEC+ fulfill their pledge to reduce production. It looks, however, that for the time being, OPEC+ is intent on curtailing growth in U.S. supply, which means that OPEC+ will keep up with increasing supply until U.S. production breaks down.

While geopolitical developments can result in a spike in oil prices, like the recent news that Israel is planning an attack on Iran’s nuclear assets, prices fall back quickly when there is no disruption to the supply of oil.  The same goes for sanctions. While there are plenty of announcements pertaining to additional sanctions, including on Russia and Iran, the market quickly dismisses the threat since, in the immediate aftermath, there is no material loss of supply.

There were major geopolitical developments last week and over the weekend, but neither will provide any support for oil prices. The big news over the weekend was the drone attack carried out by Ukraine on five airbases within Russia that appears to have resulted in damage to dozens of Russia’s long-range, nuclear-capable bombers. Russia claims that the drone attacks only did damage to two airbases, with some aircraft catching fire. The drone attack occurred within the context of Russia making gains on the ground and capturing 450 sq-km of territory in May. Additionally, Russia and Ukraine are scheduled to meet in Istanbul on Monday for peace talks. Considering the Ukrainian drone attack, Russia is likely to harden its negotiating positions, and is planning a military response to the drone attack. Ukraine has already sent a document stating that there can be no restrictions on its military capabilities, no international recognition of Russia’s control of Ukrainian territory that has been captured by Russia, along with a demand for reparations. As such, no deal seems to be in the offing, and the risks of further escalation, including geographic expansion of the conflict, are only increasing.

The conflict also continues in the Middle East with Israel pursuing the destruction of Hamas in Gaza while the U.S. is trying to reach an agreement with Iran. Last week, the U.S. provided Iran with a proposal for a nuclear deal, which includes the establishment of a regional consortium to enrich uranium for civilian nuclear purposes under the supervision of the International Atomic Energy Agency and the U.S. in response to Iran stating that it will not sign any agreement that does not allow Iran enriching uranium. President Trump has also pushed Israeli Prime Minister Netanyahu to postpone military attacks against Iran while the U.S. is negotiating with Iran.

For this week, we think it is likely that oil prices will drift downward. While the market was expecting the supply increase by OPEC+, there will still be additional supply coming onto the market, while demand growth is muted.

For a complete forecast of crude oil and refined products and other energy-related fundamentals and prices, please refer to our Short-term Outlook.

About the Author: John E. Paisie, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.