Oil Market on Edge – Comprehensive Study Notes (June 2025)

Overview

• Presentation date: July 2025, S&P Global Commodity Insights webinar “Oil Market on Edge”.
• Central theme: despite Middle-East turmoil, global oil market stayed in a $70\text{–}90\,\$/\text{b}$ band through 2023-24, but a material loosening is now visible.
• Key forward message: strong supply growth (OPEC+ & non-OPEC+) outpaces a weakening demand outlook, driving Dated Brent toward <60\,\$/\text{b} by end-2025 and into the $50\,\$/\text{b}$ range during 2026.

Recent Price Dynamics (Slide 3 & 6)

• Dated Brent oscillated inside $70\text{–}90\,\$/\text{b}$ despite geopolitical shocks.
• Spot milestones (selected):
– $\approx93\,\$/\text{b}$ early-2022 peak (post-invasion).
– $\approx85\,\$/\text{b}$ mid-2023 rebound.
– $\approx74\,\$/\text{b}$ repeated support in 2H-23/1H-24.
– $\approx64\,\$/\text{b}$ print mid-2024 before OPEC+ announcement.
• OPEC+ June-2025 communique: raise quotas even as prices fall → “no short-term price defence”.

Macro & Demand Outlook (Slide 4)

• Global macro-slowdown → S&P now subtracts $(707\,\text{kb/d})$ from 2H-25 demand vs prior view.
– Fuels segment alone down $(637\,\text{kb/d})$.
• Primary weakness: gasoline, gasoil/diesel; lesser hit to feedstocks (naphtha, LPG) & “other”.
• Trend implication: refined fuel growth plateaus mid-decade; efficiency & substitution accelerate.

Refinery/Product Flow Case Study – Dangote (Slide 5)

• 650 kb/d Lagos refinery ramps to “steady state” $210\,000\,\text{b/d}$ output in 2026, gasoline yield assumed $85\%$ capacity.
• Export reach (volumes in Mb):
– NW Europe & Baltic $4.1$; Mediterranean $1.9$; N. Africa $0.4$.
– W. Africa domestic $14.5$.
– Far East $11.8$, SE Asia $2.0$, S. America $2.3$, Caribbean $1.3$.
• Illustration: cross-basin gasoline arbitrage tightening; West-to-East flows inverted.

OPEC+ Supply Trajectory (Slides 6-7-9)

• Net OPEC+ crude growth: >$1\,000\,\text{kb/d}$ YoY in both 2025 & 2026 (ex-Libya/Iran/Venezuela).
• Country contributions 2025-26 (indicative ranking): Saudi Arabia, UAE, Iraq, Kuwait, Russia lift voluntarily; Angola/Gabon negative.
• “Supply Unleashed” scenario: if all voluntary cuts unwind faster, upside risk >$+0.5\,\text{Mb/d}$ above base each year.
• Strategic signal: cartel prioritises market share over price stability – unprecedented since 2014.

Supply vs Demand Balance (Slides 9-10)

• 2025 expected deltas (Mb/d):
– Crude supply $+3.2$ (OPEC+ $+1.1$; non-OPEC+ $+2.1$).
– Demand $+1.8$ (refining + direct use).
– Surplus $\approx+1.4$ Mb/d → inventory build & price pressure.
• 2026 similar oversupply; liquids balance chart shows supply bar consistently $\ge2$ Mb/d above demand bar.

Price Outlook & Alternative Scenarios (Slide 11)

• Base-case Brent averages:
– 2025: $68\,\$/\text{b}$ (1H $72\,\$/\text{b}$, 2H $64\,\$/\text{b}$).
– 2026: $58\,\$/\text{b}$ (1H $56\,\$/\text{b}$, 2H $60\,\$/\text{b}$).
• Scenario levers:
– “Fear diminishes”: geopolitical premium fades → sub-$50\,\$/\text{b}$ prints possible.
– “Fear premium endures”: Middle-East escalation → floor near $70\,\$/\text{b}$.
– “Tighter supply”: unexpected OPEC+ discipline or shale under-performs → mid-$80\,\$/\text{b}$ rebound.

Long-Term Production Shift (Slide 12)

• Non-OPEC+ total crude peaks $\approx2030$ then declines; OPEC+ retains growth potential.
• 2050 projection (Mb/d):
– OPEC+ crude $\approx36$.
– Non-OPEC+ crude $\approx24$ (down from $\approx32$ today).
• Strategic implication: medium-term glut transitions into renewed OPEC+ leverage post-2030.

Refined-Product Demand Peaks (Slide 13)

• Global peak years:
– Gasoline $2027\text{–}2029$, Gasoil $2024$, Jet/Kero $2037\text{–}2042$, Naphtha $2049\text{–}2050$.
• OECD already peaked for almost every product (gasoline peak 2005, gasoil 2007, total 2018).
• Emerging markets delay global peak but inevitability driven by efficiency & electrification.

Africa – Growth Potential & Constraints (Slides 14-17)

• Per-capita oil product use lowest worldwide (<$0.3$ toe pp/yr). Room for structural demand upside. • Vehicle outlook to 2050 (million units): – Internal‐combustion (gasoline + diesel) remain >$60\%$ of fleet.
– BEV penetration subdued (<$10\%$) due to policy inertia & grid deficit.
– CNG/LPG, hybrids offer limited niche.
• Policy takeaway: Africa could absorb surplus gasoline/gasoil from mature regions.

Motor-Fuel Substitution (Slide 15)

• 2024-2050 volume changes (kb/d):
– Gasoline $-7,561$, Gasoil $-5,068$.
– Jet $+2,963$, Naphtha $+2,450$ (petchem feedstock pull).
– Residual fuel $-2,988$, Kerosene $-566$, “Other” $-264$.
• Efficiency (CAFÉ, Euro 7, HDV fuel-economy) biggest drag; electrification secondary in near term.

Refinery Capacity & Runs (Slide 16)

• Global crude+condensate runs peak $2027$ at $\approx88\,\text{Mb/d}$.
• Decline by $12.8\,\text{Mb/d}$ to $2050$ due to falling demand & closures.
• Regional Δ 2050-2024 (Mb/d):
– India $+1.5$, Middle East $+0.8$, Africa $+0.7$.
– China flat $(-0.2)$, LatAm $-1.2$, Europe $-3.5$, US $-1.8$, Russia/CIS $-1.2$.
• Investment narrative: green/petchem-integrated complexes survive; standalone simple refineries at risk.

Crude Demand by Region (Slide 18)

• Peak crude/condensate demand $\approx85\,\text{Mb/d}$ in $2027$.
• Revision vs 2024 workbook: Asia mid-term lowered (historical downgrades + petrochemical “other feedstocks”).
• Regional peak timing summary: Middle East $2040$, Asia $2037$, Africa $2031$, World $2027$, North America $2018$, Europe $2004$.
• Energy-transition nuance: forecast embeds more MHEV/FHEV & fewer BEV/PHEV (security & affordability concerns).

Ethical / Practical Implications

• Market share vs climate: OPEC+ choice to prioritise output worsens carbon-budget trajectory.
• African access vs global decarbonisation: equity argument for allowing demand growth where per-capita use is minimal.
• Investment risk: refining & upstream projects sanctioned now face <60\,\$/\text{b} long-term price deck; high-cost barrels (oil-sands, Arctic) vulnerable.
• Policy lever: Strategic Petroleum Reserves may need re-evaluation in a sustained surplus environment.

Key Equations & Numbers

• Surplus calculation: $\text{Surplus}<em>{2025}=\text{Supply}</em>{2025}-\text{Demand}<em>{2025}\approx3.2-1.8=1.4\ \text{Mb/d}$. • Price band expectation: $\text{Brent}</em>{2026}=56\text{–}60\,\$/\text{b}$.
• OPEC+ growth rate: $\Delta P<em>{25}=+1\,\text{Mb/d},\ \Delta P</em>{26}=+1\,\text{Mb/d}$.
• Refinery run decline: $\Delta R_{2050}= -12.8\,\text{Mb/d}$ from peak 2027.

Study Tips

• Focus on supply elasticity of OPEC+ vs US shale – exam often probes comparative dynamics.
• Memorise critical dates: peak crude $2027$, non-OPEC+ decline $2030$, Brent <60 by end-2025.
• Practise surplus/deficit calculations using provided growth deltas.
• Understand regional heterogeneity: Africa growth vs OECD decline.

© 2025 S&P Global Commodity Insights – data and charts reproduced under educational fair-use for exam preparation.