Supply Outlook: EU Eyes Russian Imports, and US Inventories Signal Market Shift

According to the Energy Information Administration (EIA), US crude oil production is projected to decrease by 50,000 barrels per day in 2026, falling to 13.37 million b/d, marking the first yearly drop since 2021. The 2025 production growth estimate remains steady at 210,000 b/d. This reduction is attributed to a slowdown in drilling operations, with the rig count falling to 442—a level not seen since October 2021—due to persistently low oil prices.

Proposed EU Restrictions on Refined Products: The European Commission is advocating for a ban on refined product imports derived from Russian crude oil, which could affect nations like India and Turkey. In the first quarter of 2025, these countries imported 1.77 million b/d of Russian crude, while the EU received over 350,000 b/d of refined products, primarily middle distillates, from them. Enforcing this ban poses challenges, as identifying the source of crude oil in blended refined products is complex.

US Inventory Trends: The American Petroleum Institute (API) indicates that US crude oil inventories declined by 400,000 barrels last week, a smaller reduction than the anticipated 2.6 million barrels. Meanwhile, gasoline inventories increased by 3 million barrels, and distillate stocks grew by 3.7 million barrels, pointing to a bearish outlook for refined product markets.