EIA Long-Term Projection: The U.S. Energy Information Administration (EIA) projects that U.S. crude oil production will peak at 14 million barrels per day (bpd) in 2027, maintaining that level until 2030 before beginning a sharp decline to 11.3 million bpd by 2050. Shale oil production, a major driver of recent output growth, is also expected to peak in 2027 at 10 million bpd and fall to 9.33 million bpd by mid-century. These forecasts signal the nearing end of the U.S. shale boom and could undermine policies aimed at expanding domestic energy supply. The EIA also anticipates that oil demand in the U.S., rebounding after the COVID-19 pandemic, will peak next year at 20.52 million bpd, slightly below the pre-pandemic level in 2019 and the all-time high in 2005. Additionally, a U.S.-China trade war and higher steel and equipment costs due to tariffs have further dampened outlooks, leading to downward revisions in global oil demand and price forecasts. Brent crude is now expected to average $67.87 per barrel in 2025 and U.S. benchmark West Texas Intermediate (WTI) at $63.88—both notably lower than previous estimates.

U.S.-China Trade War Escalation Pressures Oil Markets: Major Gulf stock markets declined on Wednesday amid rising concerns over the escalating trade conflict between the United States and China. The downturn follows President Trump's imposition of increased tariffs on Chinese goods and investigations into further tariffs on critical U.S. imports, including minerals, pharmaceuticals, and semiconductor chips. In retaliation, China has taken steps such as instructing airlines to halt deliveries of Boeing aircraft, intensifying market fears of a potential global recession. These tensions led to broad Gulf market declines: Saudi Arabia’s main index dropped 0.4%, pressured by losses in Saudi Aramco and Riyad Bank. Dubai's index fell 0.7%, led by a 2.3% drop in Emirates NBD and a 1.3% decrease in Emaar Properties. Abu Dhabi’s index declined 0.4%, and Qatar’s index slipped 0.2%, weighed down by a 0.6% fall in Qatar Islamic Bank. Oil prices also edged down, reflecting traders’ anxieties over the trade war's impact on global economic growth and energy demand. Despite the market turmoil, United Carton Industries Company announced plans to float a 30% stake on the Saudi Exchange, marking the first IPO since the onset of trade-related market declines.

Cyclone Alfred and Asian Market Slump:  Australia's leading fuel retailer, Ampol, reported a significant 49% decrease in first-quarter refining margins at its Lytton refinery, falling to $6.07 per barrel from $11.80 a year earlier. This decline was primarily due to depressed refining margins in Singapore and the impact of Cyclone Alfred, which resulted in around ten days of lost production and raised demurrage costs due to infrastructure damage. Weak market conditions in Asia, including excessive gasoil supply and a sluggish derivatives market, contributed to the downturn. Broader industry challenges such as slowing global economic growth, increased electric vehicle adoption in China, and new refinery capacities across Africa, the Middle East, and Asia further pressured margins. As a result, Ampol may qualify for Australia's Fuel Security Services Payment if the trend continues into Q2. Despite the headwinds in refining, Ampol's Australian convenience retail segment experienced mid-single-digit percentage earnings growth, aided by strategic in-store improvements and stronger fuel margins. Analysts noted that aside from cyclone-related setbacks, the company's retail operations are performing robustly under its premium fuel and store enhancement initiatives.

Market Overview: Oil prices climbed 1% on Wednesday after initial losses, as optimism grew around potential trade negotiations between the U.S. and China. West Texas Intermediate (WTI) crude rose 59 cents to $61.92 per barrel, supported by a Bloomberg report suggesting China is open to talks if the U.S. shows more respect and appoints a new lead negotiator. Analysts noted that easing trade tensions could improve global economic prospects and limit the downside for oil demand. Still, concerns linger due to recent tariff escalations by President Trump and retaliatory actions from Beijing. These developments have already contributed to a 13% drop in oil prices this month and forced major banks to revise crude price forecasts downward.

Crude Movement Since January 20th

The Annual Energy Outlook 2025 (AEO2025) projects that U.S. energy consumption will decline in the coming years before rising again in the early 2040s through 2050, although most scenarios show 2050 consumption levels lower than in 2024. The projections vary widely depending on different assumptions and scenarios. AEO2025 includes major model updates, such as new modules for hydrogen markets, carbon capture and storage, and enhanced upstream oil and gas analysis. The analysis primarily considers laws and regulations in place as of December 2024, excluding later policy changes. This edition also features two new alternative policy cases focusing on recent developments in the electricity and transportation sectors.

Oil prices climbed nearly 2% to a two-week high due to concerns over global supply after the U.S. imposed sanctions on Chinese importers of Iranian oil. The sanctions target Iran's oil exports, including a Chinese "teapot refinery," as part of U.S. efforts to cut Iranian exports to zero. OPEC announced that Iraq, Kazakhstan, and others submitted new plans for output cuts to offset past overproduction, supporting the price rise. Meanwhile, U.S. crude inventories increased by 515,000 barrels last week, while gasoline and distillate stocks declined. Global oil demand growth is expected to be the weakest since 2020, according to the IEA, partly due to escalating U.S.-China trade tensions. Tariff hikes by the Trump administration and China's retaliation have added economic uncertainty, prompting several banks to lower oil price forecasts. Analysts warn that prolonged trade conflicts could further limit oil demand growth despite a better-than-expected Q1 GDP figure from China.