Crude oil prices have been under sustained downward pressure from a combination of weakening global demand, rising supply, and deteriorating economic signals. Energy prices fell 8% in April alone, part of a steep decline that has persisted into 2025, driven by slowing growth in the world’s largest oil-importing economies and plans from OPEC+ to bring more barrels back onto the market.
No single headline explains a day’s price move. Oil markets respond to the cumulative weight of supply, demand, and sentiment shifting at the same time. Here’s what’s pulling prices lower right now.
Global Demand Is Losing Steam
The biggest structural force behind falling oil prices is that the world simply isn’t consuming crude as fast as markets expected. Global oil demand grew by just 840,000 barrels per day in 2024, a pace the International Energy Agency describes as “relatively subdued.” That’s projected to pick up only modestly to 1.1 million barrels per day in 2025, leaving total consumption around 103.9 million barrels per day.
China is the centerpiece of this slowdown. As the world’s largest crude importer, China’s purchasing decisions ripple through the entire market. Chinese refiners imported 11.1 million barrels per day in 2024, down from 11.3 million the year before, while refinery processing volumes dropped from 14.8 million to 14.2 million barrels per day. The IEA called it “an abrupt halt to Chinese oil demand growth,” and noted that sharply lower increases also hit Nigeria, Pakistan, Indonesia, South Africa, and Argentina.
What makes this unusual is that the weakness isn’t confined to wealthy nations cutting back. In the third quarter of 2024, non-OECD oil demand (the developing world that’s supposed to be driving growth) rose just 320,000 barrels per day year-over-year, its lowest quarterly increase since the height of the pandemic.
Factory Activity Is Contracting Worldwide
Oil demand tracks industrial activity closely, and the latest manufacturing data looks soft. The global composite output PMI fell to 50.8 in April 2025, its lowest reading in 17 months. The manufacturing component slipped into outright contraction for the first time this year as firms reported declining new orders and employment. Business sentiment dropped to its lowest level since mid-2020.
China’s official manufacturing PMI fell from 50.5 in March to 49 in April, pushed down by a sharp drop in new export orders as trade barriers increased. Vietnam’s manufacturing PMI collapsed from 50.5 to 45.6 in the same period. Mexico’s fell further to 44.8, already deep in contraction territory. When factories slow down, they burn less fuel, and the oil market prices that in quickly.
Global trade is showing early strain too. New export orders across manufacturing hit a 20-month low in April, while the services trade index entered contraction after 15 straight months of expansion. The World Bank characterized this as “a broad-based softening in activity across both advanced economies and emerging market and developing economies.”
OPEC+ Is Adding Supply Back
On the supply side, OPEC+ has begun unwinding some of the production cuts that supported prices over the past two years. Eight key members, including Saudi Arabia, Russia, Iraq, and the UAE, agreed to bring back 137,000 barrels per day from a pool of 1.65 million barrels per day in voluntary cuts announced in April 2023. The group retains flexibility to pause or reverse these additions depending on market conditions, but the direction is clear: more oil is coming.
On top of that, OPEC+ still holds 2.2 million barrels per day in separate voluntary cuts announced in November 2023, which could also be returned gradually. Even before these barrels hit the market, some OPEC+ members have been persistently overproducing beyond their quotas. Combine that with robust supply growth from non-OPEC+ producers (the U.S., Brazil, Guyana, Canada), and the IEA concluded the market “looks comfortably supplied in 2025.” Comfortably supplied is analyst language for there’s no shortage, which means no price premium.
The Dollar’s Role in Oil Pricing
Crude oil is priced in U.S. dollars globally, so the strength of the dollar affects how expensive oil feels to buyers in other currencies. The relationship between oil and the dollar has been consistently negative since the early 2000s: when the dollar strengthens, oil prices tend to fall, and vice versa. Research shows this inverse correlation intensified after the 2008 financial crisis, with correlation coefficients between Brent crude and the U.S. Dollar Index ranging from negative 0.30 to negative 0.45 for several years.
The relationship isn’t mechanical or constant. It weakens during certain periods and can even flip positive when the dollar reaches extreme values. But during stretches of dollar strength, oil-importing nations face higher costs in local currency terms, which can suppress demand at the margins and push prices lower.
Trade Policy Uncertainty Compounds the Problem
Hanging over all of this is a thick layer of uncertainty around global trade policy. Commodity prices dropped 6% in April alone, with the World Bank attributing the decline to “growing concerns over the global outlook coupled with plans from OPEC+ to expand oil production.” Energy prices led the selloff.
Trade uncertainty affects oil in two ways. First, it directly chills economic activity. Companies delay investment, reduce inventory, and pull back on orders when they don’t know what tariffs or barriers they’ll face next quarter. Second, it changes expectations. Oil futures prices reflect where traders believe demand will be months from now, and when forward-looking indicators like the composite future output PMI fall to their lowest since mid-2020, traders adjust their bets accordingly.
Japan offers a useful example of how this plays out. Although its composite PMI returned to expansionary territory in April, trade policy uncertainty clouded growth prospects enough that markets began pricing in a delay to further interest rate increases by the Bank of Japan, keeping monetary policy looser and the economic outlook murkier.
U.S. Supply Remains Elevated
U.S. domestic crude production continues to run near record levels. The latest weekly data from the Energy Information Administration includes only a minor downward re-benchmarking adjustment of less than 50,000 barrels per day, roughly 0.29% of total output. American producers have shown remarkable resilience in maintaining high production even as prices soften, thanks to efficiency gains and hedging strategies that lock in future revenue.
The U.S. Strategic Petroleum Reserve held about 416 million barrels as of February 2025, up from roughly 411 million at the end of 2024. That’s still well below the reserve’s 714-million-barrel capacity, but the gradual refilling adds a modest source of demand for crude that partially offsets the bearish supply picture.
What This Means for Prices Near Term
The forces pushing oil lower are reinforcing each other. Weak manufacturing data reduces demand expectations. OPEC+ supply returning to the market erodes the scarcity premium. Trade uncertainty makes businesses cautious, further dampening consumption forecasts. And non-OPEC supply keeps growing regardless.
For prices to stabilize or reverse course, one of these pillars would need to shift meaningfully. That could look like a genuine rebound in Chinese industrial activity, OPEC+ pausing or reversing its production increases, or a resolution to trade disputes that restores business confidence. Until one of those catalysts materializes, the market’s path of least resistance remains tilted to the downside.