Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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By Irina Slav – Dec 18, 2024, 7:00 PM CST
- Oil demand growth in 2025 is forecasted at 1–1.4 million bpd.
- China’s petchem sector drives oil demand growth, but growth from its transportation sector is flatlining.
- U.S. shale production growth may slow due to higher breakeven costs, depletion of Tier 1 acreage, and subdued oil prices limiting drilling incentives.
Doubts about oil demand growth will persist beyond 2024, and fears of a price slump will be there to keep them company. That’s according to some recent predictions about the state of the oil market in 2025, which see demand growing, China directing the market, and OPEC still likely to unwind its production cuts.
As early as November, some analysts warned that OPEC may decide it has had enough of losing market share and start bringing oil back whatever the price. This could bring the benchmarks down to $40 per barrel, Tom Kloza from OPIS told CNBC.
“You could get down to $30 or $40 a barrel if OPEC unwound and didn’t have any kind of real agreement to rein in production. They’ve seen their market share really dwindle through the years,” Kloza said. These remarks echoed a forecast by the International Energy Agency, which in October said that OPEC might be facing a decline in its market share from 34% to a little over 31% by 2028, squeezed by producers including the United States, Canada, Brazil, and Guyana.
Perhaps the choice between flooding the market with crude to drown rivals, which OPEC has already done before, and keeping the output limits in place will be what marks 2025 for the production cartel. And perhaps the fear that analysts say OPEC producers should feel about the large non-OPEC oil countries is a little bit overrated.
The U.S. is the biggest threat to OPEC’s market share, according to those analysts. The largest oil and gas producer in the world, the country has boosted its production of both hydrocarbons significantly over the course of just two decades. Some in the industry are warning that this cannot continue forever at the same rate because the resources are finite, and the cheapest oil and gas has been depleted or close to being depleted. This means higher production costs down the line, even with the notorious efficiency gains that surprised the analyst tribe last year.
Related: Barclays Downgrades Energy Services Sector Amid Bearish Outlook
There is, however, a more immediate source of pressure on U.S. producers that is going to limit their own production growth next year, despite forecasts—and despite a very pro-oil president about to enter the White House in January. That source of pressure is simply the oil price.