Cairo: Hani Kamal El-Din
How and why will oil prices change in 2025?
The year 2024 ended with relative stability for the oil market, which managed to maintain a steady footing despite significant fluctuations caused mainly by speculative factors. By December, crude oil prices had largely returned to their levels at the beginning of the year. However, as we step into 2025, the global oil market faces a host of new challenges and conflicts, potentially more complex than those of the previous year.
The oil industry continues to drive growth in the global commodities sector, maintaining its status as a cornerstone of the global economy. Evidence of this lies in the record-breaking demand for crude oil in 2024, which surpassed 103 million barrels per day. Over the past three years, this figure has risen by 6%, defying earlier predictions that post-pandemic consumption levels would struggle to recover. Pessimists had once forecast that oil demand would not exceed 100 million barrels per day and might drop below 25 million barrels daily by 2050. The reality has proven otherwise, as global markets show no signs of abandoning their reliance on liquid hydrocarbons.
China’s Waning Influence
Throughout 2024, several factors shaped the trajectory of oil prices. Key among these were slower-than-expected growth in China’s energy demand, strategic decisions by OPEC+, heightened tensions in the Middle East, and bold campaign promises by U.S. President-elect Donald Trump. Each of these events left a distinct mark on oil market dynamics.
At the start of 2024, Brent crude traded at approximately $80 per barrel, consistent with the average price for the previous year. The market experienced its first major disruption in spring when logistical challenges emerged due to increased activity by Yemen’s Houthi rebels in the Red Sea. Their actions jeopardized traditional tanker routes, leading to a dramatic reduction in daily traffic through the Suez Canal—from 72 vessels to just 35 by March. Similarly, the Panama Canal saw a one-third drop in transit rates, compounding the logistical hurdles. These developments drove oil prices above $90 per barrel, fueled by fears of potential supply shortages.
Geopolitical tensions further supported elevated prices through the second quarter, particularly following an Israeli attack on an Iranian consulate in Damascus. However, as the year progressed, market focus shifted back to China’s economic struggles. Historically a dominant player in global energy demand, China accounted for over 40% of the annual growth in crude oil consumption. Yet, in 2024, Chinese oil imports declined by 3.5%, marking the first such contraction since the pandemic. This downturn spurred fears of a “Great Eastern Stagnation,” leading to a drop in Brent crude prices to around $70 per barrel, a level from which they struggled to recover.
The resulting price stability at this lower range satisfied both consumer affordability and producer revenues. Still, market participants approached the December OPEC+ summit with trepidation. There were concerns that lifting production quotas could trigger another price collapse. Fortunately, OPEC+ opted to maintain existing quotas for another 12 months, with additional voluntary cuts by members like Russia and Saudi Arabia extended until April 2025.
“The alliance’s decision to avoid production expansion was prudent and justified,” said Vladimir Chernov, an analyst at Freedom Finance Global. “The market closed the year with prices similar to those at the start, reflecting traders’ confidence in OPEC+’s ability to manage oil price stability. This suggests that while volatility will persist, prices are unlikely to deviate significantly from levels acceptable to both exporters and importers.”
India Emerges as a Key Player
In 2025, oil exporters are pinning their hopes on India, which has rapidly become one of the fastest-growing consumers of crude oil. According to S&P Global Commodity Insights, India’s oil demand increased by 180,000 barrels per day in 2024, a 3.2% annual rise. By comparison, China’s growth in demand was less than 1%, with an additional 150,000 barrels daily.
India’s burgeoning need for petrochemical feedstocks is driving this growth. The country plans to enhance its refining capacity significantly with projects like the HPCL Rajasthan Refinery, set to process nine million tons annually, over 83% of which will be imported crude. In 2024, Russian oil accounted for approximately 40% of India’s imports, making Russia the leading supplier, while the U.S. ranked fifth, providing just 215,000 barrels daily. With India’s GDP growth hovering near 5%, its daily oil demand is projected to reach six million barrels in 2025, offering Russia and other suppliers ample opportunities to expand market share.
Washington’s Disruptive Role
Despite the relative stability achieved by the end of 2024, the market faces renewed uncertainties in 2025. A major source of concern is the United States, where President-elect Donald Trump has vowed to bolster domestic oil production by three to four million barrels daily through aggressive financial incentives. Such an increase would dwarf the quotas maintained by OPEC+, potentially flooding the global market and driving prices down further.
“A surge in U.S. exports will exacerbate oversupply in the international market,” Chernov warned. “While India’s growing demand may offset some of the decline in Chinese consumption, excessive U.S. production could push Brent crude prices down to $65 per barrel or even $60 if negative trends persist.”
Faced with these challenges, OPEC+ may be forced to implement deeper production cuts. Achieving consensus, however, could prove difficult. Saudi Arabia, a key OPEC+ leader alongside Russia, has made it clear that it will not surrender its market share, setting the stage for potentially contentious negotiations.
