Amid sluggish oil trading, the market is witnessing oil prices maintaining stability. Although there are no strong fluctuations, this presents an opportunity to consider the long-term prospects of the oil industry, particularly in 2025.
Does the current oil price situation bring unexpected stability?
Macro factors, including political, economic, and technological situations, are creating new waves that the oil industry cannot ignore. As of the end of 2024, oil prices have remained stable in the global market, fluctuating around 80-85 USD/barrel for Brent oil.
This is a relatively stable price after the strong fluctuations of previous years, during which oil prices reached as high as $120/barrel in 2022 before plummeting due to the impact of the COVID-19 pandemic and the Ukraine war.
OPEC: An organization of the largest oil-exporting countries in the world
This stability is primarily due to the rebalancing of supply and demand. Major producing countries, such as OPEC, particularly Saudi Arabia, have maintained production cuts to support prices. OPEC's production cut policy remains effective, preventing oil prices from falling sharply.
What factors affect the oil market?
One major factor affecting current oil prices is the policies of major economies, especially the US and China. While the US is focusing on reducing its dependence on fossil fuels, China is increasing its oil demand in the context of economic recovery.
Climate, Tax, and Healthcare Acts
The US government continues to promote renewable energy initiatives and encourage carbon emissions reduction. New policies such as the Inflation Reduction Act have spurred large investments in renewable energy, reducing demand for oil from traditional energy sources.
However, the US remains one of the world's largest oil producers, thanks to shale oil technology. Reducing dependence on oil has made the US less influential than before in regulating global oil prices.
The impact of the Chinese oil market on global oil prices is significant.
On the Chinese side, the world's second-largest economy is recovering strongly from the pandemic, with increased demand for oil. The "Zero-COVID" policy caused substantial damage to the economy and energy demand, but as China reopens, oil demand has surged, especially in the industrial and transportation sectors.
This has boosted demand for imported crude oil, directly impacting global oil prices. China is currently one of the largest importers of oil from Middle Eastern countries, particularly from Saudi Arabia.
Outlook for the Oil Market in 2025
According to a report by the International Energy Agency (IEA), global crude oil demand will reach 103 million barrels per day in 2025, an increase of 2 million barrels compared to today. However, this growth may be affected if major countries, such as the US and China, accelerate the transition to renewable energy.
Another important factor affecting the oil market outlook in 2025 is OPEC's strategy.
The production cuts by major oil-producing countries may continue to maintain price stability. However, if these countries cannot reach a consensus on adjusting production, oil prices may experience significant volatility by the end of 2025.
What direction for investors?
With oil prices stabilizing in 2024, the oil market remains in a state of equilibrium between opposing factors: China's economic recovery and the US renewable energy transition.
Investors should also be cautious when monitoring trends in the transition to renewable energy.
In addition, it is important to monitor the international political situation, especially in the Middle East and Eastern Europe. These fluctuations can lead to major changes in oil supply and demand, directly affecting the asset value of oil companies. Investors need to be prepared for possible surprises and volatility.
