Global Oil Market Faces Uncertainty Amidst Demand Growth Concerns
The oil market is bracing for a tumultuous 2025, as concerns over demand growth in top crude importer China cast a shadow over global oil benchmarks. With Brent crude futures down 0.45% to $72.55 a barrel and U.S. West Texas Intermediate crude futures easing 0.46% to $69.06 per barrel, the market is on track to end the week down nearly 3%.
China’s Crude Import Peak Looms
Chinese state-owned refiner Sinopec’s annual energy outlook has sparked concerns that China’s crude imports could peak as soon as 2025, with oil consumption expected to peak by 2027. This downward trend is attributed to weakening diesel and gasoline demand.
Market Consolidation Phase
According to Emril Jamil, senior research specialist at LSEG, benchmark crude prices are stuck in a prolonged consolidation phase, weighed down by uncertainty in oil demand growth. To boost prices and calm market nerves, OPEC+ will need to exercise supply discipline.
OPEC+ Cuts Growth Forecast
The Organization of the Petroleum Exporting Countries and allies, OPEC+, has cut its growth forecast for 2024 global oil demand for a fifth straight month. This downward revision has added to the market’s uncertainty.
Dollar’s Rise Weighs on Oil Prices
The dollar’s climb to a two-year high has also put pressure on oil prices. A stronger dollar makes oil more expensive for holders of other currencies, while a slower pace of rate cuts could dampen economic growth and trim oil demand.
JPMorgan Forecasts Surplus
JPMorgan predicts the oil market will shift from balance in 2024 to a surplus of 1.2 million barrels per day (bpd) in 2025. This surplus is expected to result from non-OPEC+ supply increasing by 1.8 million bpd in 2025, while OPEC output remains at current levels.
G7 Considers Tightening Russian Oil Price Cap
In a move that could reduce supply, G7 countries are exploring ways to tighten the price cap on Russian oil, including an outright ban or lowering the price threshold. Russia has circumvented the $60 per barrel cap imposed in 2022 using its “shadow fleet” of ships, which the EU and Britain have targeted with further sanctions.
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