Geopolitics, Demand Take Center Stage for Oil Markets

The oil market is bracing for an unpredictable 2025 with a long list of political and economic wild cards that could swing prices one way or another. US President-elect Donald Trump’s imminent return to the White House, in particular, adds fresh uncertainty around sanctions, conflicts and trade — and their potential impacts on supply, demand, inflation and the global economy. Last year also kicked off with a focus on geopolitics amid fears of conflict-driven supply disruptions. These never fully materialized, and markets eventually focused on China’s decline as the world’s oil growth engine. The outlook for global demand growth will likely remain a strong market driver this year. The stable crude price at the end of 2024 disguised the challenges faced by traders in grappling with changes in China’s demand throughout the year. The fourth-quarter average price of $74 per barrel for Brent was down from $79/bbl in the third quarter and $85/bbl in the second, when Israel and Iran for the first time directly fired missiles at each other in a historic escalation of Mideast tensions. The price now reflects current revised expectations of softer demand growth and a deflating war premium. Key forecasters see Brent averaging around $80/bbl for 2024 and $72/bbl in 2025. Liquids demand in 2025 will rely heavily on the health of the petrochemical sector, which mostly uses naphtha and NGLs as feedstock. NGLs bypass the traditional refining system, and forecasts predict strong incremental NGL growth coming from the US.