Doubts about oil demand growth will continue into 2025, with concerns over potential price declines hanging over the market. Recent forecasts predict that while demand will increase, China will continue to shape the market, and OPEC is likely to ease its production cuts.
By November, analysts were already speculating that OPEC might start increasing oil production to regain market share, regardless of the price. Tom Kloza from OPIS warned that this could lead to benchmark prices dropping to as low as $40 per barrel. “If OPEC unwinds its production limits without a solid agreement, prices could fall to $30 or $40 per barrel,” Kloza told CNBC, adding that OPEC has lost significant market share over the years. This aligns with a report from the International Energy Agency (IEA), which in October projected that OPEC’s market share could drop from 34% to just over 31% by 2028, primarily due to increased output from producers like the U.S., Canada, Brazil, and Guyana.
As 2025 approaches, the oil cartel will face a critical decision: whether to flood the market with crude to drive out competitors or maintain its production limits. Some analysts argue that fears of non-OPEC oil producers, especially the U.S., dominating the market may be overstated. The U.S. remains the biggest threat to OPEC’s market share, having significantly boosted its production over the past two decades. However, experts caution that this growth may not continue indefinitely. The easiest-to-reach oil has been exhausted, and production costs are rising, even with improved efficiency.
In the short term, U.S. producers are under pressure from falling oil prices, which will likely curb their production growth in 2025, despite predictions of increased output under a pro-oil administration. Liam Mallon, president of upstream operations at ExxonMobil, emphasized that most producers are driven by economics, not political incentives. “A radical shift is unlikely,” Mallon said in November, adding that changes in federal drilling regulations could lead to more production, but that most drillers won’t be in a “drill, baby, drill” mindset.
Concerns about running out of high-quality drilling sites are also growing. The Society of Petroleum Engineers has pointed out that there’s little difference in quality between Tier 1 and Tier 2 land in regions like the Permian and Eagle Ford. Regardless of the tier, breakeven prices are crucial, and these are higher for shale producers compared to conventional oil fields.
When it comes to global oil demand, all eyes are on China. Wood Mackenzie predicts that China’s oil demand will continue to rise in 2025, driven almost entirely by petrochemical feedstocks. However, demand for transport fuels is expected to fall. The consultancy also forecasts a slight rise in global diesel demand, though this could be offset by China’s increasing shift toward LNG trucks. Additionally, Wood Mackenzie expects a decline in gasoline demand due to the rise of electric vehicles (EVs), while jet fuel demand is projected to increase, but not enough to offset declines in other fuel categories.
Oil demand forecasts for 2025 vary, but they generally point to moderate growth. The IEA expects demand to rise by 1.1 million barrels per day (bpd), while Wood Mackenzie anticipates a higher increase of 1.4 million bpd. ING estimates a more conservative growth of just under 1 million bpd. Morgan Stanley aligns with the IEA, projecting a 1.1 million bpd increase. Despite these varying forecasts, most analysts agree that supply will outpace demand. This imbalance is attributed to a slowdown in demand growth, especially in China, and a surplus driven by non-OPEC producers.
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