Brent oil futures for the July 2025 contract jumped +3.1% to 62.15 US dollars per barrel at the close of trading yesterday, Tuesday (6/5).
This increase occurred after a massive sell-off due to anxiety about oversupply from OPEC+ production increases as of June 2025. Currently, the price of Brent oil in the futures market fell to 60.23 US dollars per barrel on Monday (5/5), signaling the lowest level since February 2021.
Causes of Oil Price Increase
Yesterday’s increase in oil prices was most likely triggered by traders‘ buying actions, as price conditions technically entered the oversold territory. Not only that, the growth in demand from China and Europe, as well as the decline in US crude oil stocks, also supported the price increase.
The geopolitical situation also plays a role, with tensions escalating in the Middle East as Israeli attacks on Yemen’s main airport escalate.
According to Reuters, positive sentiment towards China’s economy strengthened after consumer spending during the Labor Day holiday grew +8% year-on-year. This is one of the indicators of consumer confidence in the country of bamboo curtains.
Optimism in Europe
Meanwhile, data from LSEG I/B/E/S indicates that European companies are expected to experience net profit growth of +0.4% YoY in 1Q25, against previous forecasts of a decline.
The analyst consensus also estimates that US crude oil stockpiles in the week ending May 2, 2025 will fall by 800,000 barrels. If this assumption is correct, then crude oil stocks will decline for the second time in a row, the umpteenth time since January 2025.
Stock Market Reaction
In response to this news, several shares of oil and gas issuers and oil and gas supporters strengthened on Wednesday (7/5). For example, $MEDC rose 1.44%, $ENRG jumped 5.15%, $ELSA rose 0.85%, and $WINS increased by 1.68%.
Key Takeaway
Despite strengthening, this movement in oil prices is likely to be only a technical rebound after a sharp correction on Monday (5/5). We think that Brent oil prices during 2025 will tend to stabilize in the range of 60-70 US dollars per barrel as a base case. This is in view of the still high global uncertainty and the potential for growth slowdown in various regions.
Confirmation of increased demand from China and Europe, as well as the announcement of a reduction in U.S. crude stockpiles scheduled for release late Wednesday, could be an additional catalyst for future oil price increases. But remember, price movements will also not be separated from the development of interrelated trade relations between the US and China.