London | October 2025 -The oil markets of the world have been turning on their heads in the third quarter of 2025, and the refining margins are up to multi-year highs, and demand is starting to show signs of recovery despite the economic turmoil
Refining margins were two-year highs in Europe and 18-month highs in the US Gulf Coast and Singapore in September, which are indicative of tight product markets and high seasonal demand
Global Oil Demand Rebounds
Following a slow growth in the first half of the year, the world oil demand has recovered to 750,000 barrels per day (kb/d) compared with the year before, 420 kb/d. The previous slump had been caused by world tariff tensions which hit especially LPG and ethane feedstocks, causing a rare petrochemical usage downturn
According to the projections of the International Energy Agency (IEA), annual increases of approximately 700 kb/d are projected in 2025 and 2026, which implies a gradual but stable recovery path
As economic headwinds, the increased efficiency of vehicles, and the rapid growth in the use of electric vehicles (EVs) persist in facing the demand of traditional transport fuels, the petrochemical industry is projected to regain its position as the primary force driving growth in oil consumption over the next few quarters
Growth in supply exceeds demand
Although the demand has been on an upward trend, the world oil market has registered a 1.9 million barrels per day (mb/d) excess since the turn of the year 2025. This surplus, caused by the high growth in the rate of crude production, has made the Brent crude prices stagnate at or below the price of $70 per barrel all through the year
Interestingly, natural gas liquids (NGLs) have influenced the market balance more as compared to crude oil. During the period between April and August, it happened that the NGL volumes created an overhang in the inventories around the world and the crude market itself tightened, especially outside China
Inventory and Supply Prospectus
Analysts anticipate that crude stocks will increase in the months ahead as huge amounts of oil in the ocean relocate on land into major storage centers. On the other hand, the inventories of NGLs are expected to decrease
Nevertheless, there are a number of structural issues that might keep refined product markets tight, such as
The supply of Russian products has been lost,
The future policies of the European Union concerning prohibition of imports on Russian feedstocks, and
Recent shutdown of refinery capacity in various places
These advances may neutralize the effects of the larger crude overhang, and result in the localized products shortages and help maintain refining margins into the rest of 2025
Outlook
On the whole, the oil market is at the threshold of the last quarter of 2025 with a complicated set: there is sufficient supply of crude oil, but strong product demand and geographical tightness maintain the margins. Although the prospects of long-term demand growth will be curbed by slower growth in the global economy and high rates of energy transition, refining profits and petrochemical use remain close to the support of oil prices in the near term
