Oil Analysis for the Week of April 28 – May 4, 2025: Supply Pressures and Geopolitical Tensions Push Prices Higher

Published on: May 5, 2025

During the first week of May 2025, global oil markets were heavily influenced by a combination of supply constraints, persistent geopolitical tensions, and renewed economic data from key markets. Crude oil prices exhibited strong upward momentum, with Brent crude climbing above $91 per barrel, while West Texas Intermediate (WTI) hovered near $88.50, reflecting a more bullish sentiment compared to earlier in April.

Price Trends and Market Reactions

The oil market opened the week with relatively stable prices, but upward pressure quickly emerged as investors responded to multiple supply-side and geopolitical developments. Brent crude reached a high of $91.40 per barrel on Thursday, May 2, while WTI peaked at $88.85 the same day. By the market close on Friday, both benchmarks had slightly retreated but maintained their weekly gains of around 3%–4%.

This steady climb was driven more by concerns over constrained supply and less by demand optimism. Refinery maintenance in Asia, reduced U.S. crude inventories, and growing instability in the Middle East contributed to the tightness in global supply chains.

Key Influencing Factors

1. OPEC+ policy and supply discipline.
Despite market expectations for increased output to ease rising prices, OPEC+ reaffirmed its commitment to voluntary production cuts, especially from Saudi Arabia and Russia. This continued restraint is designed to stabilize markets and avoid price collapses amid global economic uncertainty. As of this week, total output remains below pre-pandemic levels, supporting the bullish momentum.

2. Rising geopolitical risks.
In the Middle East, escalating tensions between Israel and Iran led to increased military posturing in the Persian Gulf, raising fears of possible disruptions to maritime oil transportation. Any potential threat to the Strait of Hormuz—through which over 20% of global oil flows—heightens supply concerns and encourages speculative buying.

3. U.S. inventory and production data.
Weekly data from the U.S. Energy Information Administration (EIA) showed a larger-than-expected draw in crude inventories—over 4.5 million barrels—which exceeded analyst expectations and supported bullish sentiment. Although U.S. shale production remains strong, infrastructure limitations and high breakeven costs in some fields are tempering growth.

4. China’s economic indicators.
Fresh data released on April 30 indicated that Chinese manufacturing grew at a slower pace than expected, but domestic oil consumption remains resilient due to strong transportation and aviation fuel demand. Traders continue to monitor China closely, as its recovery trajectory plays a key role in global oil demand.

Market Sentiment and Hedge Fund Activity

Commodity trading advisors (CTAs) and hedge funds expanded long positions in crude futures this week, banking on continued supply tightness and geopolitical shocks. Open interest in oil futures rose significantly on ICE and CME exchanges, indicating growing speculative positioning. Technical indicators such as the Relative Strength Index (RSI) suggested that oil was approaching overbought territory but still had upward room before hitting resistance.

Price Forecast

The near-term outlook for crude oil remains cautiously optimistic with a bullish bias. If OPEC+ maintains its production discipline and geopolitical risks in the Middle East escalate further, Brent crude could test the $95–$97 range by the end of May, while WTI could approach or exceed $91 per barrel.

However, several factors could limit further price increases:

A sudden diplomatic de-escalation in the Middle East
A faster-than-expected rebound in U.S. shale output
Weaker-than-expected demand from China or Europe due to slowing economic growth

Considering these dynamics, the base-case scenario for late May projects Brent crude in the range of $90–$94 and WTI between $87–$90, with significant sensitivity to news flow and inventory data.

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