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When Donald Trump assumed the presidency, the oil markets immediately felt the tremors of his bold energy policies. Within days of his inauguration, oil prices tumbled, with Brent crude plummeting 1.1% to USD 79.29 per barrel and WTI futures dropping 2.6% to USD 75.89.
Trump’s declaration of a national energy emergency and aggressive stance on maximising US oil production signalled a fundamental shift in global energy dynamics.
This historical snapshot illustrates the volatile nature of oil markets, where geopolitical decisions, economic policies, and global tensions can dramatically impact prices.
As we look ahead to 2025, understanding the key factors influencing oil prices becomes crucial for traders and investors seeking to navigate this complex landscape.
Global demand dynamics: A shifting landscape
The global oil demand landscape is experiencing significant transformations.
According to the International Energy Agency (IEA), global oil demand is expected to grow by 1.05 million barrels per day in 2025, reaching total consumption of 104 million barrels daily. This growth, while substantial, represents a moderation compared to historical trends.
Emerging markets are driving this expansion, with a fascinating geographic shift in energy consumption. India stands out as a particularly critical player, with its rapidly growing economy and increasing energy needs. While China’s oil demand is anticipated to peak between 2025 and 2027, India’s consumption continues to rise dramatically.
The Chinese National Petroleum Corporation (CNPC) predicts peak oil demand in 2025, attributed to increasing electric vehicle adoption and growth in liquefied natural gas (LNG) truck usage.
The electric vehicle (EV) market plays a pivotal role in these demand projections. Goldman Sachs research suggests that global EV sales will increase from 11 million in 2024 to 17 million in 2026, potentially reducing oil demand by nearly 0.6 million barrels per day by 2026. This transition underscores the growing impact of green technologies on traditional energy markets.
Price forecast: A multifaceted outlook
The 2025 oil price landscape presents a nuanced picture, with leading financial institutions offering varied perspectives.
The U.S. Energy Information Administration (EIA) forecasts Brent crude at USD 74 per barrel in 2025, with a potential decline to USD 66 in 2026.
Citi Research provides a more optimistic view, raising its Brent crude projection to USD 67 per barrel and suggesting quarterly variations from USD 75 in the first quarter to USD 60 by year-end.
Goldman Sachs takes a broader approach, anticipating Brent crude trading between USD 70 and USD 85 per barrel, with an average of USD 76.
The International Energy Agency adds depth to these projections, highlighting a global oil demand increase of 1.05 million barrels per day, pushing total consumption to 104 million barrels daily.
These forecasts are underpinned by complex market dynamics. A modest oil surplus of 0.4 million barrels per day is anticipated, with non-OPEC production expected to grow by 1.7 million barrels per day.
The rising electric vehicle market could reduce oil demand by 0.6 million barrels per day by 2026, adding another layer of complexity to price predictions.
Supply-side considerations: A delicate balance
The supply landscape is equally intricate. The US Energy Information Administration (EIA) forecasts US crude oil production to reach 13.5 million barrels per day in 2025, with modest growth expected in 2026.
Non-OPEC production is predicted to grow by 1.7 million barrels per day, with substantial contributions from the United States, Canada, Brazil, and Guyana.
OPEC+ remains a critical player in maintaining market stability. The organisation has implemented multiple production cuts since April 2023, strategically managing global supply.
Despite these efforts, prices have continued to decline, falling from USD 85 per barrel in April 2023 to around USD 74 per barrel by December 2024.
The organisation’s spare capacity provides a crucial buffer against potential market disruptions. This strategic approach allows OPEC+ to prevent extreme price fluctuations while managing global supply dynamics.
The group’s ability to adjust production quickly gives them significant market influence, acting as a stabilising force in an otherwise volatile market.
Technological innovations and supply chain developments
Technological advancements are transforming oil production, especially with hydraulic fracturing and horizontal drilling unlocking previously inaccessible reserves.
In the US, the Permian Basin produces nearly 5 million bpd, making up around 40% of US output. Over the last decade, drilling costs in the basin have dropped by 30%, thanks to more efficient techniques like extended laterals and multi-stage fracking.
Seismic imaging and AI-driven optimisation have improved reserve identification and output by 10-15%, reducing exploration costs. On the supply side, pipeline expansions like Cactus II, which transports oil from the Permian to the Gulf Coast, have alleviated bottlenecks, cutting transport costs by up to 5 USD per barrel. These innovations are enhancing production efficiency and stabilising oil prices.
Geopolitical risks and potential disruptions
Geopolitical tensions continue to cast a long shadow over oil markets. The ongoing Russia-Ukraine conflict, potential Middle Eastern instabilities, and complex US-China trade dynamics create an environment of significant uncertainty.
The United States has introduced new sanctions targeting Russian oil producers, specifically targeting over 100 Russian tankers and oil producers. These sanctions, introduced in January 2025, have the potential to disrupt global oil supply chains and create additional market volatility.
The Red Sea shipping disruptions further complicate the global oil transportation landscape. Tensions involving Yemen’s Houthis and potential limitations on vessel movements introduce additional risk factors that traders must carefully monitor.
Conclusion
The oil market in 2025 promises to be a complex ecosystem shaped by technological innovations, geopolitical tensions, and evolving energy consumption patterns. Successful traders will need to remain flexible, well-informed, and adaptable.
The interplay between fossil fuel markets, green technologies, and geopolitical uncertainties creates a challenging yet potentially lucrative trading environment. Understanding these dynamics is key to informed investment decisions.
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