A crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas. — Reuters file
Analysts anticipate a well-supplied oil market by 2025 due to the unwinding of Opec+ production cuts and increased supply from non-Opec+ producers. This scenario could lead to moderate inventory builds as global oil demand growth decelerates. Oil prices surged more than one percent on Monday, buoyed by robust factory activity in China and escalating tensions in the Middle East, where Israel resumed attacks on Lebanon despite a ceasefire agreement, according to Reuters.
Brent crude futures rose 91 cents, or 1.27 percent, to $72.75 a barrel by 1357 GMT, while US West Texas Intermediate crude climbed 97 cents, or 1.43 percent, to $68.97. The global oil market has experienced significant volatility and uncertainty over the past year. In October 2024, the return of Libyan barrels to the market more than offset lower Kazakh and Iranian supplies, resulting in a global oil supply increase of 290,000 barrels per day to 102.9 million bpd, according to the International Energy Agency (IEA).
Opec+ delayed the unwinding of extra voluntary production cuts to January 2025, at the earliest. Non-Opec+ producers are expected to boost supply by approximately 1.5 million bpd in both 2024 and 2025. World oil demand is projected to expand by 920,000 barrels per day (bpd) in 2024, reaching 102.8 million bpd, and just under 1 million bpd in 2025, to 103.8 million bpd, according to the IEA. This slowdown reflects the end of the post-pandemic release of pent-up demand, below-par global economic conditions, and the deployment of clean energy technologies.
Brent crude oil futures exhibited a range-bound trend, peaking at $80.90 per barrel in early October 2024 due to Middle East tensions but later easing to around $73 per barrel by month-end. Speculative positions in paper markets remain near historical lows. Global oil inventories plummeted by 47.5 million barrels in September 2024, reaching their lowest level since January. OECD industry stocks fell by 36.4 million barrels to 2,799 million barrels, 95.3 million barrels below the five-year average.
Provisional data indicate that total global stocks decreased for a fifth consecutive month in October. JPMorgan analysts forecast Brent crude oil prices to average $75 per barrel in 2025, declining to the low $60s by year-end. This prediction assumes a well-supplied market and continued economic challenges. Geopolitical tensions, especially in the Middle East, continue to influence oil price movements. Any escalation in conflicts could cause short-term spikes in oil prices, but the overall trend is expected to decline due to ample supply and sluggish demand.
Global oil demand growth is projected to slow, with an annual increase of just 0.4 million bpd until 2027, according to Deloitte. This reflects the end of the post-pandemic release of pent-up demand and the impact of clean energy technology deployment. The ongoing transition to clean energy is expected to have a long-term impact on oil demand. The growth of electric vehicle sales and improvements in energy efficiency are likely to reduce reliance on fossil fuels.
While supply is expected to remain robust, demand growth will likely slow, leading to moderate price declines. Geopolitical tensions and the clean energy transition will continue to shape market dynamics, making it crucial for stakeholders to remain vigilant and adaptable, analysts say.
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