Going into 2025, oil markets assessment supports continuing low oil prices based on what is currently happening around the world.
The Ukrainian war is no longer a serious global supply chains disruptor, unless of course a more serious regional escalation emerges. The war between Israel and its immediate adversaries is nearing an end, leaving Iran as the only Middle East area with potential for conflicts that could disrupt oil supplies.
The incoming US President Trump will be a major influence with predictable impacts on oil markets.
Brent crude oil prices have oscillated in the lower half of $70 per barrel over most of the second half of 2024, with expectations that prices will maintain the same levels during the early parts of 2025.
The key factors that are expected to maintain this level of prices include delayed increase of oil production by Opec+, and the ongoing stepped-up oil production in the US, Guyana, Brazil, and offshore western coasts of Africa.
This points to a 2025 oversupplied with oil, a factor that will depress prices.
The US oil industry expects regulatory rollbacks by President-elect Donald Trump, and this will invariably include empowerment of increased oil production, with a view to lowering pump prices and inflation.
Mr Trump is also expected to take a tough stance on Opec+ should they conspire to reduce supplies with the intention of higher oil prices.
Any US climate change initiative by Joe Biden government that plans to reduce fossil fuels participation in the economy, will likely be sidelined to focus on energy security, economic growth, and job creation.
And this equally applies to competing renewable energy that may work against preferred US economic outcomes. However, the ongoing global EV technological and investment momentum led by China is irreversible and will continue to reduce oil demands.
In respect of the oil demands, Chinese economic performance is expected to continue supporting increased oil consumption which will directionally exert pressure on oil prices.
And this equally applies to the ongoing industrial upsurge in India which will similarly increase global oil demands. Expectations are that China, India and the US will dominate global oil demand growth, which will be amply balanced by increased supplies from around the world.
Here in Kenya, pump prices have been coming down in the past few months, a reflection of prevailing low global oil prices. Unless there are other regulatory or fiscal driven price changes, it is expected that pump prices will continue to be reasonably low, with the positive impact of keeping inflation down.
