We’re on the brink of major shifts in the oil market, driven by the potential return of a protectionist Trump 2.0 era and an outward-looking, expansionist China 3.0 moving beyond export-led growth.
That’s what Mukesh Sahdev, Rystad Energy Global Head of Commodity Markets – Oil, stated in an oil market update by the Rystad team on Monday, adding that “these factors reflect an evolving approach … updated versions that signal significant transformations ahead”. In the update, Sahdev also said OPEC+ has evolved through three phases of market management and outlined that its “emerging 4.0 policy” focuses on “price stability, crude market backwardation, and the expansion of refining and petrochemical capacity both domestically and internationally”. Sahdev noted in the update that, as Trump 2.0 and China 3.0 take shape, OPEC+ is likely to proceed cautiously, extending production cuts for another one to two months with a strong focus on compliance, balancing crude exports vs product exports, while closely monitoring ongoing conflicts in Russia-Ukraine, Gaza, and Israel-Iran. “These factors will play a key role in shaping the events of the coming year and have the potential to significantly influence the outlook for 2025,” Sahdev said in the update. The update also warned that, “with potentially aggressive or confrontational plans as part of President Donald Trump’s second regime to push significantly higher tariffs on China, the hopes of a China-led global demand recovery are fading”.
“For 2025, China demand growth is projected to be less than 100,000 barrels per day,” it added.
The update stated that China 3.0 is likely to be an era of demand attrition domestically, “driven both by Trump 2.0 tariffs and continued acceleration of the energy transition”. It noted that “China 3.0 growth is more likely to come from the Chinese expansionist approach within Africa, Europe, and Latin America, while Trump 2.0 follows an isolationist approach”. As global demand recovery fades and geopolitical tensions rise, particularly with Trump 2.0’s proposed tariffs on China, OPEC+ faces limited options, a section on OPEC+ 4.0 in Rystad’s oil market update stated. “The group has recently focused on enforcing stricter compliance with production cuts, especially from countries that have previously underperformed,” the section said. “Our forecast for 2025 remains unchanged since last November, with expectations of a shift from a balanced market in 2024 to a large surplus of 1.3 million barrels per day in 2025,” they stated in the note. “Global oil demand growth will likely decelerate from 1.3 million barrels per day this year to 1.1 million barrels per day next year, as the last phase of the post-pandemic rebound dissipates and advancement in energy efficiency and the expansion of a decarbonized fleet gain momentum in China,” they added.