How to trade crude oil? Mohammed Imran of Mirae Asset Sharekhan decodes

Strong demand to see higher oil prices in short term

Global Crude oil prices have recovered mostly from April’s shocker when prices plunged over 18 per cent as the WTI hit $55/b, its lowest level in four years, affected by OPEC+ decision to raise the output three times then earlier planned, along with US-China indulgence of counter tariff wars, which feared the global markets of an economic meltdown. WTI fell $13 in April to finish under $60, but since then oil prices have recovered over 10 per cent with WTI holding above $60 for most part of May.

Strong seasonal demand

Crude oil enters the strong demand season (June- August) typically arising from the northern hemispherical countries like US and EU, where gasoline demand surges due to driving and vacation tourist demand. On the other hand, the industrial demand also remains the strongest between April to October, however due to the ongoing trade war, the global manufacturing and industrial activities are witnessing the unusual slowdown from all the quarters.

 

Asia to lead increased demand

The leading Asian economies of India and China accounting for 20 per cent of global energy demand, saw its crude oil appetite sliding in April mostly due to trade war related economic slowdown. India's crude oil imports were approximately 4.88 million barrels per day (mb/d) or 19.6 million metric tonnes (MMT), reflecting a 1 per cent decline compared to April 2024. The import bill for crude oil in April 2025 was around $12.3 billion, a 17 per cent decrease from April 2023, driven by lower global oil prices, with the Indian crude basket averaging $68.34 per barrel, a 47-month low. India's reliance on imported crude remained high at 88.2 per cent for the fiscal year up to April 2025, with domestic production at 2.3 MMT. On the other hand, China’s total crude oil imports stood at 48.06 million tons in April, or 11.69 million bpd, lower from March but up 7.5 per cent y/y. 

 

Overall we expect Asian demand will gradually recover in coming months with China’s domestic economic demand staying stronger in April. The de-escalation of China-US trade war restored market sentiment but also tempered the pace of policy easing, However, China may face further headwinds in 3Q25 due to the softening property market, payback effect of export frontloading and fading impact of trade-in program.

Russia/Iran dodge sanctions

Sanctions are having a muted impact on export revenues of Russia and Iran as Russian seaborne crude exports have once again reached around 3.4 million barrels a day, while Iran is able to export between 1.4-1.6mbpd with 90 per cent of its exports flowing to China despite of all the sanctions in place. 

Supply glut fear as OPEC+ loosens taps

The global crude oil market is expected to end up in surplus of 0.8-1 mbpd by end of 2025 as OPEC+ surprised the world by raising the output thrice to their earlier plans of rephasing the output cuts. The cartel has further decided to keep increased production at 411kpbd for July, earlier on May 3, OPEC+ agreed to raise its crude production level by 411,000 bpd in June higher from their earlier plan of 138kbpd. OPEC+ is boosting output to reverse the 2-year-long production cut, gradually restoring a total of 2.2 million bpd of production. OPEC+ had previously planned to restore production between January and late 2025, but now that production cut won't be fully restored until September 2026.  OPEC Apr crude production fell -200,000 bpd to 27.24 million bpd. Concern about a global oil glut is negative for crude prices, but the current higher production would be negated by expected stronger demand in June-September period and surplus would gradually be rising by Q4-2025.

US Crude production eases

WTI Oil prices are down 15 per cent ytd, and most of the shale producer’s economic viability of pumping oil becomes less effective once the WTI falls under $60. US crude oil production in the week ending May 16 was unchanged w/w at 13.392 million bpd, modestly below the record high of 13.631 million bpd from the week of December 6, while the active US oil rigs in the week ending May 23 fell by 8 to a 3-1/2 year low of 465 rigs.  The number of US oil rigs has fallen over the past two years from the 5-year high of 627 rigs posted in December 2022.

Outlook

Oil markets may face an oversupply in the second half of 2025, alongside potentially weakened demand due to Trump's inclination towards universal tariffs. This situation could create a perfect storm for falling oil prices. We expect WTI oil prices to trade in a broader range of $58-$65, supported by stronger demand, slowdown in US production and delay in expected increased output from non-OPEC nations. 

(This article is by Mohammed Imran – research snalyst, Mirae Asset Sharekhan. Views expressed are his own.)