2024 was a challenging year for OPEC+. Oil prices remained subdued as crude supply growth outpaced demand, and the group of oil exporting nations will face the same market conditions in 2025, with the added uncertainty of a disruptive Trump presidency.
Sluggish energy demand in China, the world’s second-largest economy, and increased oil supply on the American continent forced in 2024 the 22-member group to keep their own production in check to avoid a sharp deterioration of crude prices.
“Without considering geopolitical factors and given the sluggish demand, the oil market would have faced significant oversupply this year if not for the OPEC+ production cuts. The outlook for 2025 remains bleak amid persistent US-China trade tensions," said Wael Mahdi, a Saudi independent energy commentator specialising in OPEC and the co-author of “OPEC in a Shale Oil World.”
The president-elect has threatened to impose 60% tariffs on China and 20% on the other exporters to the US, the world’s largest economy. If enacted, such measures will severely impact the global economy and international trade, boosting inflation and hurting demand for commodities, including crude oil.
“The tariff threat is very likely a bargaining tactic to extract concessions from China,’’ said Naji Abi Aad, an energy expert and former OPEC consultant based in Vienna. “The Chinese are pragmatic; they will find a way to deal constructively with Trump.”
Oil markets shrug off Middle East turmoil
The price of Brent crude, the global benchmark produced in the North Sea, averaged about $80 per barrel in 2024, despite the wars in Gaza and Lebanon, the strikes exchanged by Israel and Iran, and the attacks on shipping in the Red Sea, a major international trade route, by Yemen’s Iran-backed Houthi group.
All this violence hitting the region that supplies a third of the world’s oil should have caused prices to go a lot higher. In 2022, when Russia launched its military offensive towards Kyiv, Brent exceeded $120 bpd.
In the case of the Middle East, the market players—traders, refiners, oil importers—were quick to assess that neither Iran nor Israel wanted a full-blown regional war and that there was no immediate threat to Gulf oil production.
The geopolitical risk was not, however, completely discounted; oil did rise to about $90 per barrel when Iran and Israel exchanged missile and air strikes in April. Prices have since fallen from that level, standing at $73 per barrel in mid-December.
Bearish market fundamentals
On the supply side, US production reached a record high in August 2024, producing 13.4 million bpd, consolidating its position as the top crude producer, a position it has been holding since 2018, thanks to the development of extraction from the shale basins. Production in Canada, Brazil, Guyana and Kazakhstan also went up in 2024 and should continue to do so in 2025.
On the consumption side, China is still reeling under a property market slump while weak consumer confidence and job security concerns continue to linger following the COVID-19 pandemic.
