Oil outlook: Supply excess, weak Asia demand to keep WTI in $61-66 range

Crude oil Fall Amid Supply Surge and Demand Uncertainty

 

WTI crude oil prices opened weaker, tumbling over 4 per cent in early trading, a sharp reversal from the prior week's modest 2.2 per cent. The sell-off was triggered by fresh fears of an impending OPEC+ production hike of 137,000 barrels per day (bpd) in November, coupled with Iraq's resumption of 500,000 bpd crude exports via the Kurdish pipeline to Turkey after a 2.5-year halt. Over the last two months, oil has oscillated in a $5–$6 range, encapsulating a persistent tug-of-war between excess supply and sporadic geopolitical flare-ups.

 

Growing supply glut fear 

OPEC+ has flooded the crude oil market with it’s earlier than expected redemption of production cut policy which was to gradually end by end of 2026. Since April 2025, OPEC+ has restored 2.6mbpd of oil, considering 137kbpd of October. OPEC+ production hikes and non-OPEC+ growth have led to a 0.5 mb/d surplus. However  IEA’s September Oil Market Report highlights a tightening supply-demand balance, with global oil demand projected to rise 740 kb/d y-o-y in 2025.

 

Ukraine renewed defence strategy

 

Ukraine renewed its strategy to target Russia energy infrastructure in mid-2025, As of September 30, 2025, Ukraine's evolving defense strategy emphasising long-range strikes and asymmetric warfare has emerged as a significant vulnerability for Russia's energy sector, which funds over 30 per cent of the Kremlin's war budget. The introduction of Ukraine's domestically produced Flamingo medium-range missile in August 2025 amplifies the threat. With a 3,000 km range and 1-ton warhead, it can strike nearly all Russian energy assets, including remote Siberian refineries previously out of reach. Ukrainian forces have conducted over 20 drone and missile attacks on refineries and pipelines, disabling 20 per cent of Russia's refining capacity. This development is a bullish development for oil prices for short term.

 

Lacklustre Asian demand

 

The Asian giant of China and India are expected to led the incremental demand as together they  accounted for 60 per cent of global demand growth, driving Asia’s August imports to 27.02 mb/d, up 1.9 per cent Y-o-Y. Yet, the overall demand outlook remains cautious. China’s crude imports reached 376 million tons YTD(August), up 2.5 per cent year-on-year, averaging 11.3 mb/d, Meanwhile, India’s crude imports fell 2.9 per cent year-on-year in August to 19.6 million tons, though they rose 3.76 per cent month-on-month.   

Oil demand faces heat from NEV

  Globally, EV sales are forecasted to hit 20 million units in 2025, displacing 1.3 mb/d of oil demand equivalent to a 30 per cent increase from 2024 levels. The rise of electric vehicles (EVs) represents a seismic shift in the global energy landscape, posing a direct challenge to crude oil demand, particularly in gasoline and diesel segments. With China commanding nearly 51 per cent of the global EV market share in 2025 up from 40 per cent in 2024 the country's new energy vehicle (NEV) sector has exploded, growing at a 28 per cent compound annual growth rate (CAGR) over the last decade. In stark contrast, China's gasoline demand has limped along at a 4 per cent CAGR over the same period, reflecting a plateau in traditional fuel consumption. China's dominance is unmistakable. In 2025, NEV sales are projected to reach 12 million units, capturing 55 per cent of China's new vehicle market up from 4.4 per cent in 2018 and driving global EV penetration to 25 per cent.

 

Macro-economic development

 

China's economy is defying the trade war with Bejing focusing on driving growth through domestic demand, while also increasing the export shares to non-US geographies. In last six months exports to ASEAN rose to 18.5 per cent (from 15 per cent in early 2025), Europe to 16.2 per cent, and Belt and Road nations to 28 per cent, collectively offsetting a 12 per cent drop in US-bound shipments.. The Eurozone economy demonstrated resilience in September 2025 with the European Central Bank (ECB) staff projections revising real GDP growth upward to 1.2 per cent for 2025 (up 0.3 percentage points from June), 1.0 per cent for 2026, and 1.3 per cent for 2027. On the other hand, US August's 22,000 payrolls (29,000/month average June–August) and 4.3 per cent unemployment (highest since October 2021) signal widening fissures, exacerbated by tariff-induced uncertainty—manufacturing lost 12,000 jobs, and federal layoffs hit 97,000 YTD. 

 

Outlook 

We expect WTI crude to trade within a broader range of $61–$66/bbl, with rallies likely capped by supply excess and macroeconomic headwinds. While US-NATO support for Ukraine may drive short-term upside in crude prices, sustained gains are unlikely without firm demand from Asia. The US President’s stern stance against India and delayed trade negotiations with China suggest continued tepid demand in the near term.

 

(Disclaimer: This article is by Mohammed Imran, research analyst at Mirae Asset Sharekhan. Views expressed are his own,)