The main reason behind the downward revision of our oil price forecast is the adjustment in our oil demand growth estimates. We have lowered our projections for this year from 1.5 million barrels per day (mbpd) to 1.2 mbpd, and for next year, from 1.3 mbpd to 1.2 mbpd, due to weaker demand growth in China. Additionally, global oil inventories are falling faster than expected, which suggests that oil demand may have been underestimated in supply-demand models from energy agencies.
We have also revised our non-OPEC+ supply growth estimate for 2025 to 1.3 mbpd. For next year, we believe the oil market will be balanced, or only slightly oversupplied. However, since many market participants expect a much larger oversupply, financial investors are currently positioned cautiously, which leaves room for prices to recover from current levels.
Since the U.S. election, much attention has been focused on President-elect Donald Trump’s “drill baby drill” stance and his proposed tariffs. However, we maintain that U.S. crude production is primarily driven by the spot price, not the person in the White House. With U.S. crude prices (WTI) now trading within the production curve, if current prices hold, U.S. crude production could remain flat or even decline next year. Furthermore, energy executives have emphasized their focus on maintaining capital discipline.
While tariffs remain a potential risk to oil demand growth in 2025, any economic slowdown they cause could likely be offset by rate cuts and fiscal stimulus measures. Additionally, the nomination of officials to the next Trump administration points to a tougher stance on Iran and Venezuela. As a result, new sanctions could lead to a reduction in oil exports and production from these two countries in the coming year.
Related Topics:
- Russian Oil Imports Key to Global Price Stability
- Enverus: Global Oil Demand Expected to Remain Steady, Not Falling 15% by 2030
- Oil Prices Drop as Trump Signals More Support for Increased Drilling