Global Oil Market Outlook: Supply Disruptions, Robust Demand, and Geopolitical Factors

Global oil markets are currently experiencing a delicate equilibrium, with crude prices recently buoyed by significant supply disruptions in northern Iraq against a backdrop of robust seasonal demand. Despite these upward pressures, underlying geopolitical and policy uncertainties, coupled with anticipated increases in global output, suggest a complex and potentially volatile trajectory for energy commodities in the coming months.

• Drone attacks in Iraqi Kurdistan have halved regional oil output, reducing production from approximately 280,000 barrels per day (bpd) to between 140,000 and 150,000 bpd.
• Iraq’s federal government has announced the resumption of oil exports through a pipeline to Turkey, ending a two-year hiatus for Kurdish oil shipments.
• Global oil demand averaged 105.2 million bpd in the first two weeks of July, marking a 600,000 bpd increase year-over-year.
• Analysts anticipate a tight oil market through the current quarter, with supply expected to improve from Q4 as producers unwind output cuts.
• Broader macroeconomic factors, including lingering U.S. tariff policy uncertainty, are contributing to overall market cautiousness.

Global Oil Supply: Navigating Disruptions

Recent drone attacks targeting oilfields in Iraqi Kurdistan have severely impacted regional output. These incidents have reduced production from an estimated 280,000 barrels per day (bpd) to a range of 140,000 to 150,000 bpd. While no specific group has claimed responsibility, energy officials have attributed these attacks to Iran-backed militias, intensifying concerns about regional supply stability. Paradoxically, amidst these disruptions, Iraq’s federal government announced a significant development: the resumption of oil exports through a pipeline to Turkey. This move effectively ends a two-year hiatus for Kurdish oil shipments, potentially adding new supply to the market once fully operational and stable.

Demand Trends and Market Balance

Concurrent with anxieties surrounding supply, robust global demand continues to underpin oil prices. Analysts at JPMorgan recently noted that global oil demand averaged 105.2 million bpd in the first two weeks of July. This figure represents a substantial 600,000 bpd increase compared to the same period last year. This surge is largely attributable to strong summer travel activity, particularly within the United States, which has effectively absorbed increases in OPEC+ supply. Further reinforcing demand, government data revealed a larger-than-expected decline in U.S. crude inventories last week, primarily attributed to rising exports. Demand from Asian economies also firmed as refineries concluded their maintenance cycles, aligning with the region’s peak seasonal consumption patterns.

Outlook and Macroeconomic Headwinds

Analysts at ING project that near-term oil fundamentals will remain supportive, anticipating a fairly tight market through the current quarter. However, the market is expected to become better supplied from the fourth quarter of the year as major oil producers unwind their voluntary output cuts and Northern Hemisphere summer demand naturally recedes. Furthermore, broader macroeconomic factors are contributing to a cautious market sentiment. Lingering uncertainty surrounding U.S. tariff policy, for instance, adds a layer of economic ambiguity. While daily trading has seen modest gains for crude contracts, both Brent and West Texas Intermediate (WTI) benchmarks recorded weekly declines. This reflects the complex interplay of immediate supply-demand dynamics against longer-term supply increases and persistent economic uncertainties.