Fighting for markets: how the energy sector will evolve in 2025
Russia's energy sector in 2025 will continue to develop in the context of geopolitical uncertainty and fluctuations in global markets. Increasing competition will require domestic companies to introduce new technologies and optimize production processes. Experts are convinced thatChina will remain the main importer of Russian energy carriers. The forecast of oil, gas and coal market development is in the Izvestia article.
What will happen to oil
In 2024 the world demand for oil has been weakened, mainly because of the largest consumer - China, where economic growth rates have slowed down from 9% to 4-5% per year, draws the attention of Evgeny Smirnov, Doctor of Economics, Head of the Department of World Economy and International Economic Relations of the State University of Management. The second significant factor of weakening demand for oil is the transition to electric vehicles, which reduces fuel consumption.
Meanwhile, the International Energy Agency expects demand to increase by 1.1 million barrels per day. Thus, it will amount to 104.3 million barrels per day, points out the founder of the investment company SharesPro Denis Astafiev.
OPEC+ production, according to the expert, may increase. In particular, the United Arab Emirates plans to increase it by 300 thousand barrels per day from April 2025. However, the overall situation will depend on the decision of the entire alliance.
In early December 2024, OPEC+ extended the voluntary reduction of oil production until 2026. Nevertheless, even taking this factor into account, oil production in the alliance countries, as well as non-member states, shows high levels, Smirnov notes. In this regard, and in 2025, the world will see an oversupply of oil.
The situation with the return to production volumes will depend on geopolitical factors and the amount of oil coming to the market, says Nikolay Pereslavsky, head of the economic research department of CM Service.
- The scenario in which the organization decides to reduce production in 2025 even more strongly should also not be excluded from consideration. In any case, OPEC+ countries will fight to maintain a price comfortable for their budgets, even with a possible loss of share in the oil market, - the expert believes.
How oil prices will change
In general, the acceleration of demand for oil and stable supply growth will lead to the fact that in 2025 world fuel prices will fluctuate in a narrow range. This is evidenced by the oil futures concluded in recent months, emphasizes Evgeny Smirnov.
- We should not expect shock volatility on the world oil market in 2025, it will be in a relatively stable state, - predicts Smirnov.
However, oil prices are under pressure from weak Chinese demand and concerns about increased fuel production, mainly from America, as well as the prospect of tougher sanctions against Iran, lists Nikolay Pereslavsky.
The cost of benchmark grades of oil may decline this year, Denis Astafiev points out. According to the forecast of the U.S. Energy Information Administration, the average price of Brent oil will be at $73.58 per barrel. The US Department of Energy expects the price to drop to $74 per barrel by the end of 2025. Astafiev believes that the value of WTI oil, in turn, will be in the neighborhood of $60.
With Urals the situation will be a bit more complicated, Nikolay Pereslavsky does not rule out. The G7 countries are seeking to tighten sanctions against Russian oil. The options under consideration range from a complete ban on supplies to lowering the price ceiling to $40 per barrel from the current $60.
To avoid losing its export revenues, Russia will seek to increase supplies to China and India. And these supplies, as before, will take place at a price discount, Smirnov admits.
At the same time, discounts on domestic oil have been significantly reduced since the start of the SWO. Today they are minimized due to the use of shadow fleet. This trend will continue, Pereslavsky believes. In 2025, the Russian government plans to reduce the discount of Urals to Brent for tax calculation to $10 per barrel, Astafiev predicts.
Prospects for the development of the gas industry
Meanwhile, gas supplies in 2025 may undergo significant changes, Denis Astafiev suggests. "Gazprom" does not expect to extend the contract for gas transit through Ukraine after 2024. The volume of gas production in Russia in 2025, according to the basic forecast of the Ministry of Economic Development, may reach 695.4 billion cubic meters.
Asian countries, especially China, may become the largest importers of Russian gas in 2025, Astafiev predicts. Gas supplies to China via the Power of Siberia pipeline are expected to reach 38 billion cubic meters.
However, Russian exports will grow due to the increase in supplies not only to China, but also to Europe, admits Evgeny Smirnov. Now exports in this direction are actively increasing. At the end of 2024, Russian gas imports to the EU will be 15% higher than the level of 2023.
- The fact that the gas transit contract with Ukraine is expiring may lead to even greater growth of Russian LNG exports to Europe. In addition, the ban on re-export of Russian LNG through European countries, which is coming into effect, may lead to an unintended increase in imports," the Izvestia interlocutor does not rule out.
Despite this, the global gas markets will continue to be in a deficit state. The consequences of the shock associated with the cessation of Russian pipeline gas supplies to Europe will be more and more tangible, Smirnov believes.
- These persistent infrastructure problems will lead to the fact that in 2025 supply will yield to demand on the world gas markets," the expert believes.
Competition for LNG supplies in the world will intensify, including due to such factors as ongoing conflicts, he points out. As a result, the market will be "bullish" and investors will continue to play on price increases.
How the coal industry will develop
Theglobal coal market in 2025 is likely to remain the most stable of all energy commodity markets, says Evgeny Smirnov. China, which accounts for more than 50% of global consumption of this type of fuel, continues to restore imports. Among other things, this is being achieved due to the continued growth in demand for electricity.
- It is precisely because the power industry is the main sector driving the growth in global demand for coal that its consumption remains stable even with the significant development of alternative energy in the world. Global demand and world coal prices remain low, which will cause Russia to reduce coal exports in 2025. But this reduction is likely to be insignificant and will not exceed 10% of the 2024 level, " the expert suggests.
The Russian Ministry of Energy, in turn, expects that coal supplies to China will return to the level of at least 100 million tons per year from 2025. Coal exports from Kuzbass in the eastern direction are expected to reach 54.1 million tons.
However, China is not a very convenient partner for supplies of thermal and coking coal, as the rigid administrative style of economic management is aimed at minimizing the cost of imports without taking into account the interests of exporters, explains Ivan Petrov, Professor of the Department of Sectoral Markets at the Faculty of Economics and Business of the Financial University under the Government of the Russian Federation.
- The decisions of Chinese regulators to impose duties on imports of Russian thermal and coking coal demonstrate China's zero interest in Russian coal at current prices," the expert believes.
But this is not something critical. More than 100 countries use coal in their fuel and energy balance, he reminds.
- And Russia has the potential to supply unique high-quality coal. Under these conditions, it is necessary to diversify supplies taking into account the existing instruments of export support, including coal chemical products through coal gasification," says the Izvestia interlocutor.
In case the scheme of coal export to the East is restored under agreements with the regions, negotiations on discounts for transportation in the north-western and southern directions with compensation of shortfall in income of Russian Railways, as well as ensuring price regulation of cargo transshipment in ports, the coal industry will be able to restore its export potential and thus increase its investment attractiveness, Petrov admits. In this situation, we can only hope that the interested representatives of regional and industry authorities will be able to reach an agreement.
Overcoming the industry's problems observed last year will depend on the global economic recovery and climate policy, Denis Astafiev is convinced. Not the least role in this will be played by the Russian leadership, which understands the social and economic role of the coal industry, Petrov believes.
- There is no doubt that the leaders of the energy, economic and infrastructure sectors of the Russian economy will make balanced decisions to ensure sustainable development of the industry, for which the appropriate conditions will be created. In this sense, the current crisis in the coal industry has exposed many problems, the solution of which will lead to reforming not only the sectoral but also general economic relations to ensure sustainable development of the industry," predicts the Izvestia interlocutor.
Speaking about the prospects of such development, it is important to recall the directives to ensure the development of coal chemistry - this is the most economically justified way to develop the coal industry, which is implemented by the leading coal-mining countries, summarizes Petrov.
