Commodity factor: what to expect for the oil and gas market in 2025
In 2025, oil may fall in price to $60-65 per barrel, experts told Izvestia. One of the reasons is the slowdown in the economies of many major fuel consumers - China, the United States and Europe. The cost of raw materials may also decrease due to the increase in production outside OPEC+ throughout the year, as well as in the alliance itself from April 2025. At the same time, we should not expect any large-scale developments in the oil industry. At present, Russia continues to implement the world's largest oil project, Vostok Oil, but the launch of its first stage is expected in 2026. As for gas, after the possible termination of Ukrainian transit, there will be only one option for supplying Russian fuel to Europe - through Turkey. At the same time, the termination of transit will have an insignificant impact on the overall gas balance of the Russian Federation.
What will happen to oil prices
World oil prices in 2025 may be lower than in 2024, Natalia Milchakova, a leading analyst at Freedom Finance Global, told Izvestia.
- Demand for oil, according to OPEC and International Energy Agency forecasts, will be quite moderate next year, decreasing by 10% in 2025 compared to 2024. This situation will be due to the fact that the economy of many major consumers is slowing down (primarily China, as in the U.S. and Europe it slowed down long ago), and the demand for alternative energy and electric cars, although at an unstable pace, but gradually growing,- the expert emphasized.
In her opinion, in 2025, the price of black gold at $60 per barrel may become a reality, although at this level OPEC+ will certainly resume production cuts.
On December 5, 2024, the OPEC+ countries decided to extend the current terms of the deal to reduce oil production until April 2025. From that date until the end of September 2026, the organization planned a gradual withdrawal from the voluntary cuts of 2.2 million barrels per day, which were assumed in November 2023 by eight countries - Russia, Saudi Arabia, UAE, Algeria, Iraq, Kuwait, Oman and Kazakhstan.
The remaining cuts (1.65 million bpd) and existing production curtailment quotas will continue until the end of December 2026. The largest volume of reductions, both mandatory and voluntary, falls on Russia and Saudi Arabia (about 9 million barrels per day for each state).
At the beginning of 2024, the price of Brent crude oil was about $77 per barrel. At the same time during the year, the cost of black gold declined to $70, and by the end of the year was in the neighborhood of $73, indicate the data of the ICE exchange.
It is important to note that the escalation of tension in the Middle East continues, associated, in particular, with events in Syria, said Valery Andrianov, associate professor at the Financial University under the government. And the threat of another full-scale war in the region is the factor that keeps oil prices from falling significantly, the expert said.
As Izvestia wrote, the situation in Syria may affect the transportation of energy resources. Experts reported that logistics will be disrupted, as the destruction of infrastructure and sanctions have made the country unsuitable for large transit projects. Syria is now a key link for routes running through the Middle East to Turkey and Europe.
On December 8, the Russian Foreign Ministry reported that Syrian President Bashar al-Assad, after negotiations with the opposition, left the post of head of state and left the country, giving instructions to carry out the transfer of power peacefully. The situation in the country escalated as a result of a major attack by armed groups in Aleppo and Idlib, which began on November 28 and led to retaliatory actions by the Syrian army.
However, according to Valery Andrianov, the oil market has already come to terms with the existing geopolitical risks and they are embedded in the current quotations. The events of 2024 showed that the stock exchange reacts poorly to military conflicts and upheavals in the region.
- The "Donald Trump factor" will play a big role. It is commonly believed that his return to the Oval Office will have a negative impact on oil quotations as he will lift restrictions on the development of shale production in the US. But Trump is less interested than anyone else in the collapse of prices, because to ensure the profits of U.S. oil and gas corporations need prices of at least $60 per barrel, even taking into account the declining cost of shale production," the expert said.
Thus, while there is no reason to expect growth of quotations in 2025, a good option would be to keep them in the corridor of $70-75 per barrel, but their decline to $65-70 is also likely, the expert believes. Going beyond $80 or falling below $65 is possible only in case of any unpredictable factors, the so-called black swans, he added.
In addition, in 2025 we should not expect any momentous projects in the oil industry, said Valery Andrianov.
- Now our country is continuing the implementation of the world's largest project - "Vostok Oil", which will provide diversification of oil supplies to the world market, but the launch of its first stage is expected not next year, but in 2026, - he said.
It should be taken into account that Russia is limited in its production and exports due to the OPEC+ agreement, the analyst added. To comply with it, it even had to decommission part of its facilities. In other words, the decline in production in recent years is not a consequence of Western sanctions and not the result of lack of projects, but a conscious decision of the Russian leadership in order to maintain stable high world oil prices together with OPEC+ partners, the expert said.
What will happen to gas transit and gas prices?
On January 1, 2025, Ukraine will stop transit of Russian gas due to the end of the five-year contract. This was announced in advance by the country's Prime Minister Denys Shmygal during a speech in the Verkhovna Rada.
On January 1, the suspension of supplies was also confirmed by Gazprom.
"Due to the repeated and clearly expressed refusal of the Ukrainian side to extend these agreements, Gazprom was deprived of the technical and legal possibility to supply gas for transit through Ukraine from January 1, 2025. Since 8:00 Moscow time, there has been no supply of Russian gas for its transportation through the territory of Ukraine," the energy company said in a statement in its Telegram channel.
Because of the forthcoming cessation of Russian gas transit through the territory of Ukraine, the authorities of Moldova and Transnistria have introduced a state of emergency since December 16. Moldovan President Maia Sandu said that negotiations with Kiev on the continuation of gas supplies for the republic's needs had failed.
Centralized heating was cut off in Transnistria after the suspension of Russian gas supplies to Moldova. This was reported by the company Tirasteploenergo on January 1.
"From 7:00 (08:00 Moscow time) in the morning, the supply of thermal energy for heating and hot water supply to the population, budgetary institutions and organizations of all forms of ownership, except for medical institutions, is stopped," the company's Telegram channel Sputnik Middle Abroad reported.
Russian President Vladimir Putin and Slovak Prime Minister Robert Fitzo met on December 22 , Kremlin spokesman Dmitry Peskov said. Earlier, the prime minister said that his country would lose €500 million a year on gas transit.
On January 1, Fitzo saidon his Facebook page (owned by Meta Corporation, recognized as an extremist organization and banned in Russia) that the cessation of supplies "will have radical consequences for all of us in the European Union."
Now some European countries will be forced to look for alternative supply options, experts believe.
- There are two possible options for maintaining gas supplies to Slovakia "from the eastern direction". It can be assumed that they were discussed during the visit of the Prime Minister of this country to Russia. The first of them is to organize transit of Azerbaijani fuel through Russia and Ukraine. Most likely, this gas would be "Azerbaijani" only legally, while in reality it would be about supplies from Western Siberia, but on the basis of a swap with Azerbaijan. Theoretically, in this case, Kiev and Brussels should have no reason to refuse such supplies. But how they will actually react to this option is unclear," Valery Andrianov said.
The second option is to supply gas via Turkish Stream and further via Balkan Stream. This pipeline does not reach Slovakia, but it is possible to build a junction through Hungary. In this case, the volume of supplies could be 1.5-2 billion cubic meters of gas per year (at the current consumption of Slovakia in 4-4.5 billion cubic meters per year), the expert believes.
In general, there may remain only one option for Russian gas supplies to Europe - through Turkey, the expert noted. At the same time, the termination of transit will have an insignificant impact on the overall gas balance of the Russian Federation - its volume in 2024 amounted to about 15 billion cubic meters. m. For comparison, gas production in the country in 2023 amounted to 637 billion cubic meters, said Valery Andrianov.
In 2025, we should not expect any new gas pipeline routes to be launched - at present, the main hopes for increasing fuel exports are associated with the Power of Siberia-2 project with acapacity of 50 billion cubic meters, but a final agreement with China on the construction of this pipeline has not yet been reached, he added.
- As for the cost, there are no preconditions to expect sharp price spikes, but the general dynamics is likely to be upward. At the same time, the critical factor for Europe is not so much the high level of gas prices (in previous years, even higher values were recorded), but the high volatility and unpredictability of quotations. This will have a negative impact both on the gas market itself and on the development of the European economy and industry," said Valery Andrianov.
New pipeline projects are likely to appear, including those involving Gazprom, such as a possible construction of a gas pipeline through Syria, a gas pipeline to Pakistan, etc., said Natalia Milchakova.
How profitable shale gas production in the USA will be, taking into account that gas consumption in Europe in general will start to decrease, and there is not much demand for expensive LNG from the USA in Asian countries, is a big question. We can expect the exchange price of gas in Europe to be $400-550 per 1,000 cubic meters, she said. At the beginning of 2024, this figure was at $400 per 1,000 cubic meters, and in December the cost rose to about $470, data from the TTF exchange indicate.
The outlook for gas costs depends on the global energy strategy, said BitRiver financial analyst Vladislav Antonov.
- LNG continues to take over the world, but increasing supply, especially from the U.S. and Qatar, is putting pressure on prices. Gas is expected to cost around $450 per 1,000 cubic meters in 2025, barring extreme weather or geopolitical crises," he said.
Europe, seeking to diversify supplies, will remain an important player, but high gas reserves by winter may soften demand and prices, Vladislav Antonov added.
2025 is a chess game where every move is a combination of OPEC+ decisions, supply and demand, economic incentives and unpredictability of weather or politics, the expert concluded.
