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OPEC has made the final and deepest cut to its demand growth forecasts for 2024. It now expects global demand to rise by 1.61 million barrels per day (mb/d) year-on-year (y-o-y). This is a downward revision from the 1.82 mb/d y-o-y forecast made in November 2024. The cartel also lowered its 2025 y-o-y demand growth forecast from 1.54 mb/d to 1.45 million b/d. As per claims, cartel members own 79.1% of the world’s proven crude oil reserves. Therefore, its forecasts and efforts to balance lower demand with supply cuts impact the global oil markets. Keeping an eye on OPEC reports and OPEC+’s (OPEC + 10 of the world’s largest oil-producing nations, excluding the US) actions is crucial for trading oil.
The July 2024 monthly oil market report (MOMR) predicted that the global oil demand would rise by 2.25 mb/d year-on-year in 2025. However, since then, OPEC has lowered its demand forecasts every month. In addition to lowering demand forecasts, the cartel has delayed output increases to April 2025, citing several challenges.
The World Economic Forum (WEF) expects the global electricity demand to rise sharply in 2025. However, the share of fossil fuels (including oil) is set to decrease from 70% to 65% during the year. As clean energy initiatives accelerate, oil demand will continue to decline, especially in the EU. As stated by a Resources for the Future (RFF) annual report, achieving the climate change targets for 2030 and 2050 will require demand to peak between 2025 and 2030. This may encourage more pro-clean energy policies and initiatives worldwide, exerting downward pressure on oil prices. However, the report also highlights that clean energy production and utilisation growth is not at par with global energy demand growth.
For traders, the demand-supply imbalances and attempts to accelerate clean energy adoption will trigger volatility in oil markets. This is set to create abundant oil trading opportunities in the near term.
According to the US Energy Information Administration (EIA), countries that are not members of the OPEC+ drove supply hikes through 2024 and are expected to continue to do so in 2025 as well. The EIA highlighted that these oil producers increased production by 1.9 mb/d in 2024, led by the US, Canada and Guyana. The organisation expects non-OPEC+ supply to further increase by 1.6 mb/d in 2025, leaving only a 10% share of global production with the syndicate. Therefore, OPEC+’s grip on oil supply and hence prices may loosen.
Why does this matter to you? The subdued global demand, accompanied by an increase in supply from competitive producers, may exert downward pressure on oil prices through 2025.
Faith Birol, the Executive Director of the International Energy Agency (IEA) said, “Bar major geopolitical conflicts, we will be entering a period where prices will see significant downward pressures.” The IEA has stated that India, Southeast Asia, the Middle East and Africa are the largest sources of rising energy demand. However, they are also actively driving the switch away from fossil fuels.
China, which drove global growth and fuel demand through the initial part of the 21st century, accounted for 60% of the global renewable capacity added in 2023. The Red Dragon’s PV generation is forecasted to exceed US electricity demand by 2030. That means demand for oil from the global growth engine will decline. Additionally, India, the fastest-growing major economy, also increased its nuclear power capacity in the same year. The two massive economies have accelerated efforts to lower carbon emissions, pressuring global oil demand.
While making oil trading decisions, you must consider how well the renewable energy transition is going in these countries and whether it can meet the national demand. As energy demand accelerates, de-linking economic growth from non-renewable energy without sufficient clean production could become a challenge. This could support the oil markets.
Against a backdrop of shifting global demand-supply equilibrium, here are a few tips to refine your oil trading strategy.
Brent crude lost its gains and settled at $73 per barrel after OPEC released its December report. Stay updated on the latest market news, such as forecasts and production changes, to make informed decisions.
While the BRICS nations attempt to de-dollarise the global economy, President-Elect Donald Trump has threatened 100% tariffs. This could affect America’s trade relations with BRICS member nations, which may translate into a higher demand from these countries for the OPEC+ produce. This will support Brent prices, while weighing on WTI. Learn more about trading the two. In addition, to the two oil commodities, diversifying into indices that give exposure to renewables can be helpful.
High volatility creates more opportunities. However, it also necessitates risk management. A popular way to manage price volatility risk is to use derivative instruments, such as contracts for difference (CFDs). They enable you to hedge your positions in one direction with those in the opposite direction, reducing market reversal risks. Additionally, CFDs help you increase your purchasing power with leverage. Since this amplifies potential gains and losses, placing risk limits, such as stop-loss and take-profits, is essential.
For now, the global markets are waiting and watching for oil policy changes under the Trump administration. Therefore, keeping an eye on the various reports and market developments is crucial to making informed oil trading decisions.
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