Oil Prices Rise On Improving Market Sentiment

Oil prices are looking to finish the week in the green, with the pessimism that dominated the markets in the early part of the year beginning to dissipate.

Brent crude for May delivery was trading at $73.67 per barrel at 11.50 am ET in Thursday’s session, flat on the day but nearly $2 higher from a week ago while the corresponding WTI contract was unchanged on the day but similarly gained $2 from a week ago to trade at $69.67 per barrel. Oil prices have now climbed about $5 per barrel from their early-month lows.

A recent Dallas Fed Energy Survey revealed that activity in the oil and gas sector increased slightly in the first quarter of 2025 while the company outlook index decreased 12 points to -4.9, suggesting slight pessimism among energy companies.

According to the latest Baker Hughes data, U.S. rig counts have continued their sideways move, falling by one w/w to 486. Rig count has remained in the 472-488 range for 41 consecutive weeks. The Permian Basin rig count fell by one w/w to 300, having previously been below 300 for just one week in the past three years. The main change was in the Texas portion of the Delaware Basin where drilling fell by three w/w to a three-year low of 62 rigs. In contrast, the U.S. gas rig count rose by two w/w to 102, with the Haynesville and Marcellus rig count unchanged at 30 and 26, respectively. Likewise, positioning across the energy complex remains mainly negative, with traders concerned about Trump’s tariffs as well as a potential return of Russian oil flows.

And now commodity analysts at Standard Chartered have buttressed the growing bullish thesis, saying oil market sentiment continues to improve after the lows hit during London’s IE Week in February. StanCharts points to several catalysts driving the improving mood. First off, the supply surpluses the market feared have yet to materialize, with the outlook for Q2 and Q3 suggesting that no surplus is imminent. In contrast, oil markets could soon be facing a deficit, with StanChart predicting that global demand will exceed supply by 0.9 mb/d in Q2 and by 0.5 mb/d in Q3. The U.S. Energy Information Administration (EIA) is, however, more cautious, and sees demand outstripping supply by 0.1 mb/d in Q2 and a balanced market in Q3. Both the EIA and StanChart have forecast a slight inventory draw across 2024 and 2025 combined.

Last week, StanChart revealed that global oil demand remains robust, with demand in January averaging 102.77 million barrels per day (mb/d), good for a  2.19 mb/d Y/Y increase. StanChart’s figure is based on a variety of national sources and the 19 March Joint Organisations Data Initiative (JODI) release. Notably, the estimates from Standard Chartered align closely with those from the U.S. Energy Information Administration (EIA), which has estimated January oil demand at 102.74 million barrels per day (mb/d), with a growth rate of 1.85 mb/d. Typically, January marks the seasonal dip in global oil demand. However, Standard Chartered forecasts that demand will surpass 105.0 mb/d for the first time in June, peaking at a high of 105.6 mb/d in August 2025.

Further, Standard Chartered has predicted that the dramatic slowdown in U.S. oil production growth witnessed in 2024 will continue in 2025 and 2026.

According to the analysts, last year witnessed a sharp slowdown in non-OPEC+ supply growth from 2.46 mb/d in 2023 to 0.79 mb/d in 2024, primarily caused by a reduction in U.S. total liquids growth from 1.605 mb/d in 2023 to 734 kb/d in 2024. StanChart expects this trend to continue, with U.S. liquids growth expected to clock in at just 367 kb/d in 2025 before slowing down further to 151 kb/d in 2026.

Meanwhile, Europe’s gas prices have pulled back to around €41/MWh from February highs near €60/MWh as traders shift focus to stockpiling for next winter. Gas price volatility remains high, with the price trajectory broadly sideways. Front-month TTF has mostly moved into the EUR 41.95-42.00 per megawatt hour (MWh) range over the past 10 trading days. EU gas inventories stood at 39.81 billion cubic metres (bcm) on 23 March, good for a y/y fall of 29.33 bcm and 12.54 bcm below the five-year average. Storage levels remain below 34% of full capacity, keeping supply risks in focus.