Wild Cards Become the Norm for 2025 Oil Outlooks

International oil traders see a fairly soft market in 2025 from a supply and demand perspective but say a laundry list of outside factors adds layers of unpredictability. Speaking at the Energy Intelligence Forum 2024 in London this week, executives from trading houses Vitol, Trafigura and Gunvor agreed that ample supply could keep the Brent crude price around the current low- to mid-$70s per barrel range, but that wild cards will determine the upside or downside risk. The executives noted that incoming US President Donald Trump could have decisive impacts on wars in the Middle East and Ukraine; sanctions on Iran and Russia; and global tariffs, trade and inflation — all factors that could affect global market dynamics but whose impacts are for now hard to assess. Only half-jokingly, Vitol CEO Russell Hardy predicted Brent could be between $50 and $90 at this time next year before settling on a consensus $70-$80 range. Trafigura head of oil Ben Luckock noted the unavoidable factor of Opec-plus when assessing future prices, commending the group for “stewarding this market through arguably unprecedented troubled waters” over the last five years. But Gunvor CEO Torbjorn Tornqvist told delegates that Opec-plus will have “no room” in 2025 for additional output from a fundamental perspective — “and the market will remind them of that.” Energy Intelligence data for 2025 signals that balances will flip from a supply deficit of 250,000 barrels per day in 2024 to a surplus of 700,000 b/d next year, assuming Opec-plus keeps voluntary output cuts in place. With all these uncertainties playing out, Opec-plus is likely to extend its cuts when ministers meet on Dec. 1, Hardy said. Luckock highlighted Iranian oil exports as a wild card: Some analysts predict a limited impact on the Islamic republic’s exports if the US tightens sanctions, while others think most of its 1.7 million b/d could fall away.

All these political and economic wild cards are being dealt as the energy transition advances, making forecasts beyond 2025 even less reliable. A key uncertainty is demand for transportation fuels, which is poised to start falling in the US, the EU and China. The big surprise in 2024 was peaking demand in China for transportation fuels, as cars there switched to batteries more quickly than expected and trucks started shifting to LNG fuel. One question now is how fast this trend can move beyond China. This will take time, with Europe lining up while the US moves more slowly, Chuka Umunna, head of sustainable solutions at bank JP Morgan, told the Forum. Steady 2024 refinery crude runs versus 2023, as shown in Energy Intelligence data, imply global demand for transportation fuels is close to peaking, not just in China. Much of that is the result of efficiency gains on top of the increased use of electric cars. Umunna argued that there might be ups and downs in the uptake of EVs, but in the medium term, “the trajectory is set” — and pointing upward. With government incentives, China is rapidly building out its charging network, while batteries and EVs are getting cheaper and better. Skip York, chief energy strategist at refinery consultant Turner Mason, said creating an incentive for alternative transportation is a key stumbling block outside China. In the US, the solution for long-haul trucks, which account for 80% of the country’s diesel demand, will likely trend toward biodiesel rather than hydrogen, York said.

In the push and pull of these myriad uncertainties and competing dynamics, oil companies still broadly see a medium- to long-term case for production growth. Global demand growth might be uncertain and may slow as the energy transition matures. But countries outside Opec-plus, such as the US and Guyana, are pumping more oil than ever before while bringing down costs, they noted. Still, rising decline rates and the market’s increased dependency on “just-in-time” supplies are buffering arguments for continued investment — and in some cases, even reigniting concerns of supply shortfalls later this decade. “People today looking at markets seem to be more bearish because of demand, because of China, which was the engine of all growth,” TotalEnergies CEO Patrick Pouyanne told the conference this week. “But you have a new engine for growth — India.” The French major recently flagged a possible supply gap emerging in the late 2020s alongside its own plans to now grow oil and gas output by 3% annually through 2030. Vicki Hollub, CEO of US giant Occidental Petroleum, believes if US output growth is still needed a decade out, it will require the industry to “crack the next nut” on technologies to boost recovery factors in both unconventional and conventional reservoirs. “What keeps me awake at night … is on the supply side,” said Exxon Mobil upstream head Liam Mallon, noting the industry’s heavy dependence on technology rather than new discoveries to meet demand. Mallon argued that oil companies looking to grow will need to tap exploration, existing asset optimization and acquisitions — in addition to technology — to deliver sufficient supplies.