What awaits the global oil market in 2025. Dissection
Specialists of the International Monetary Fund (IMF) believe that the average price of a barrel of oil will be $69.76 in 2025 and $67.96 in 2026. However, there are several factors that can affect the situation on the global market. What will happen to the industry in 2025 - in the material "Izvestia".
What prices will be
- The IMF believes that the average price of a barrel of oil will be $69.76 in 2025 and $67.96 in 2026. It means a simple arithmetic average of prices for oil of Brent, Dubai and WTI grades. At the same time, according to the October forecast, in 2025 the price of a barrel of oil will be $72.84.
- This adjustment to the forecast is due to the decline in oil prices caused by weak demand from China and high supply from non-OPEC+ countries. This was only partially offset by higher gas prices as a result of colder than expected weather and supply disruptions, particularly due to conflict in the Middle East and gas field disruptions.
- At the same time, the U.S. Department of Energy expects the average price of Brent crude oil in 2025 at $73.58/bbl. The agency believes that the subsequent increase in OPEC+ production and the continued growth of oil supplies from countries outside the alliance will lead to an average increase in reserves.
- The expert community notes that OPEC's production curbs have led to reserve capacity building up. The group has largely held significant reserves since the pandemic, and its high level of unused capacity is one of the main reasons crude prices have remained more resilient to supply shocks (such as those related to geopolitical risks).
- The abundance of available oil has also reduced the likelihood of a sudden spike in oil prices. Saudi Arabia (47%), the United Arab Emirates (23%), Iran (9%) and Iraq (9%) hold the largest share of OPEC's spare capacity (together about 6.6 million barrels per day).
Key players
- Asian countries remain the main drivers of growth. However, the role of China will noticeably decrease, it will give way to India and other Asian countries, which together will increase demand by 0.48 mln bpd. At the same time, the entire demand can be satisfied by the increase in production of non-OPEC+ countries. Thus, the USA, Canada, Brazil and Guyana together can give 1.2-1.5 mln barrels per day increase. And this leaves the volume that OPEC+ would like to return to the market as a source of a potential overhang of "extra barrels".
- At the moment, OPEC+ reserve capacity is at a very high level of over 6 million bpd. This fact continues to weigh on the quotations and prevents them from going higher.
- OPEC+ realizes its role as a balancer in the market and will continue to postpone the relaxation of quotas and is unlikely to decide to significantly increase supplies next year. At its meeting in early December, the organization for the third time in a row postponed the start of a gradual increase in production, this time by one quarter.
How events will unfold
- In the long term, Norway's declining oil and gas production will strengthen Russia's influence in the global energy market. Moscow is unlikely to dominate Europe again as it did in the past, when it had a market share of almost 40%. But the call to open the pipes and gates to cheap Russian gas will grow louder over time as gas prices rise due to Norway's declining production.
- All of this creates the preconditions for closer cooperation with Russia and will encourage the emergence of Russian-friendly politicians in countries such as Slovakia and Hungary.
- The key risk factors for oil prices next year will be the pace of demand growth in Asian countries. The main negative surprise in 2024 is that demand growth in China has slowed and even gone into negative territory since the middle of the year.
- In 2025, most of the world's energy agencies forecast moderate demand growth in the Middle Kingdom. Analysts expect that the measures taken by the Chinese government to stimulate the economy will have an effect. However, the threat of unpleasant surprises still remains.
- Another risk factor is discipline within OPEC+. Not all members of the alliance may agree to limit production in order to keep prices at a comfortable level for producers to the detriment of their share in the market.
- At the same time, it is still difficult to assess the possible impact of the US on the oil market. "Storms, baby, storms" is Donald Trump's campaign slogan. He promises to massively increase production of oil and other light hydrocarbons by 15%, or 3 million barrels per day. The US is already the largest energy producer in the world. America produces more than 13 million barrels of oil and gas condensate alone, while Russia and Saudi Arabia produce about 10.5 million barrels per day.
How sanctions affect Russia
- On January 10, the U.S. already imposed the "most significant sanctions" against the Russian oil industry. Two of Russia's four largest oil producers (Gazprom Neft and Surgutneftegaz), dozens of oilfield service companies, traders around the world who trade Russian oil, and more than 180 tankers that transport Russian oil have been hit.
- The Kremlin said it would analyze the situation with U.S. sanctions against the oil sector before taking retaliatory measures. Presidential spokesman Dmitry Peskov stressed that it was important to "minimize the consequences of illegal measures."
- As a result of the sanctions, exports of Russian oil products surged in January to the highest in 11 months amid the imposition of new sanctions. Average daily shipments from Russia in the first ten days of January totaled 2.5 million barrels, 12% more than the daily shipments in December and the highest since February.
- At the same time, oil and gas revenues of the federal budget amounted to Br11.131 trillion by the end of 2024. This is Br178 billion less than the level expected by the Ministry of Finance, which could increase the not yet announced size of the budget deficit for the past year. However, the rest, i.e. non-oil and gas revenues, the budget is expected to collect, according to expectations, more than the plan. So the final deficit will rather depend on the scale of the traditional December spending surge.
- The Russian Finance Ministry promises to ensure budget fulfillment regardless of the external environment. If oil falls below $60, the missing amounts will be compensated by the National Welfare Fund.
- Weakness of the ruble exchange rate in the fall of 2024 is mainly due to a decrease in the inflow of foreign currency into the country and a reduction in sales of export earnings by major exporters. Experts expect the dollar/ruble exchange rate to be in the range of ₽100-105 in the first quarter of 2025. It is possible that closer to the end of the year, the ruble exchange rate will weaken if oil prices remain low. Therefore, locally the dollar exchange rate may rise to ₽113-118, taking into account the reduction of exports and increased inflation in Russia.
In preparing the material Izvestia spoke with:
- Igor Yushkov, leading analyst of the National Energy Security Fund, expert of the Financial University under the Government of the Russian Federation;
- financial advisor and economist Alexey Rodin.
