Oil Market Trends and Geopolitical Impacts in 2025
As geopolitical tensions rise, particularly between Israel and Iran, the global oil market faces uncertainties. The International Energy Agency (IEA) has released its medium-term outlook, titled “Oil 2025,” which outlines key trends that will shape oil supply and demand in the coming years. This report indicates that while global oil demand is expected to grow, production capacity will outstrip this demand.
Global Demand Forecast
The IEA predicts an increase in global oil demand by 2.5 million barrels per day (mb/d) from 2024 to 2030. This growth will plateau at approximately 105.5 mb/d by the end of the decade. India is anticipated to lead this demand surge, with a rise of 1 mb/d attributed to strong GDP growth. However, overall annual demand growth is expected to slow . By 2030, a slight decline in demand is projected due to economic challenges and a shift towards alternative energy sources.
Production Capacity Projections
Global oil production capacity is forecasted to rise by over 5 mb/d, reaching 114.7 mb/d by 2030. This increase will primarily come from Saudi Arabia and the United States. The growth in production capacity exceeds the projected demand growth, indicating potential oversupply in the market.
Changes in Major Consumer Patterns
China’s oil consumption is expected to remain nearly unchanged by 2030 compared to 2024 levels, contrary to earlier forecasts of growth. In contrast, the United States is expected to see an increase in oil demand by 1.1 mb/d due to lower petrol prices and a slowdown in electric vehicle adoption. These shifts highlight the changing dynamics among the world’s largest oil consumers.
OPEC+ and Production Cuts
The OPEC+ alliance has begun to unwind production cuts that have been in place for nearly five years. This shift in policy is reshaping global oil supply trajectories, potentially leading to increased market volatility.
Iran’s Oil Supply and Sanctions
Despite stringent US sanctions, Iran’s oil supply has shown resilience. In 2024, Iran’s oil production reached its highest level since 2017, with exports to China. However, recent sanctions targeting Iran’s oil supply chain have created uncertainty. A notable drop in Iranian crude imports by Chinese buyers indicates increasing tensions in this sector.
Refining Sector and Biofuels Growth
The IEA report anticipates that net refinery capacity will exceed demand for refined products by 2030, leading to potential shutdowns in refining capacity. Concurrently, global biofuels production is projected to increase, with Brazil and India spearheading growth in ethanol output. This transition reflects a broader shift away from fossil fuels in developing economies.
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