This is the space where the latest developments on oil supply and demand, the general state of the energy sector, macro and microeconomic news and geopolitical events are detailed. In today’s note, this is the space where the exact same factors are viewed from the perspective of the inaugurated US President, Donald Trump. In his pugnacious address, he reversed many of his predecessor’s measures and policies.

He declared a national energy emergency, promised to fill up the Strategic Petroleum Reserve (more than 250 million bbls was used by the Biden administration to tame prices), and pledged to ramp up energy production and boost exports. During his speech, the White House announced the withdrawal from the Paris Climate Accord after the hottest year on record. EV mandates will be revoked and the auto industry saved.

He also declared a national emergency at the Mexican border and promised to retake the Panama Canal, which was ‘foolishly gifted’ to Panama. More worryingly for Canada, Mexico and possibly Greenland, he floated the idea of 25% tariffs on the neighbouring countries and said that America would expand its territory. His persistence on tariffs prevailed as he assured his audience that ‘we will tariff and tax foreign countries to enrich our citizens’. He also made it clear that in his foreign policies he wants to be seen as a peacemaker and unifier in reference to the Ukrainian and Middle East conflicts. The first day of the next four years did not produce any major surprise but governments, politicians, CEOs, investors, allies and foes can rest assured of or spend sleepless nights pondering the unpredictability that will be the norm in months and years to come.

Fragmentation and Polarization

As the new year began, we have shared our view of what to expect in 2025. We also drew your attention to the most significant risks that might shape the globe and investors’ thinking, as seen by consultancy, the Eurasia Group. With January slowly coming to an end and President Trump having re-occupied the White House yesterday, the synopsis of the predictions of our friends at Energy Intelligence (EI) below will be the last one in the series of the 2025 forecasts. The rest of the year, then will inevitably be spent by observing how accurate these assorted views turn out to be.

Wherever one turns, whatever prognosis one reads, the common denominator seems to be uncertainty and danger posed by an unpredictable and fractured global order. It makes research and forecasting distinctively challenging. EI sees three major hotspots where world powers have clashed recently and could do so in 2025: the Middle East, Ukraine and the potential trade war between the US and China. The outcomes of these conflicts will be markedly shaped by the precarious policies of the old/new US President.

The situation in the Middle East is as complex as ever. Israel feels emboldened after successfully waging campaigns against Hamas and Hezbollah. The removal of Assad in Syria might result in a stable government, with some sanctions lifted and refugees returning. The million-dollar question will be Iran’s role in the ever-changing landscape in the region and the new US administration’s approach towards its adversary. Salient factors will be the fragile truce in Gaza and Lebanon, the transition in Syria, Iran’s reaction to the recent changes, the US sanction enforcement on Iran and its approach towards the Houthi attacks in the Red Sea.

Changes in the Russia-Ukraine war are impending. Donald Trump promised to end the hostilities swiftly as the war is putting unbearable burdens on both warring parties. Vladimir Putin is showing an increasingly visible willingness to resolve the conflict through talks. There are, however, significant hurdles. Russia will want security guarantees and will have territorial demands, which could be unacceptable for Ukraine and its allies. The three possible scenarios, according to EI, are a negotiated deal, escalation in tension and withdrawing support for Ukraine, essentially helping Russia gain fresh momentum.

The risk of trade wars, between the US and its foes and allies is another source of uncertainty in 2025. The political and economic relationship between the US and China will be the key driver of geopolitics and economic outlook. Should the promised 60% tariff on Chinese goods be implemented reciprocal measures will be more than plausible. The main victim of the trade war would be the global economy. Given the economic headwinds China has been facing since the pandemic a surprise trade deal must not be ruled out, however. US threats, territorial as well as economic, against Greenland, Canada, Panama, Mexico and anyone who runs a trade surplus are other points of contention and unpredictability.

The picture is murky, but the current snapshot forced EI to lower its expected normalized band for Brent prices from $75-$85 to $67-$77 for 2025. It sees a slowdown in global oil demand growth, possibly below 1mbpd although it notes that other forecasters are more optimistic. This comparatively downbeat view is the function of struggling China, economic and political uncertainty and structural shift in oil consumption.

On the supply side of the equation, the reassuringly available spare capacity also acts as a break on any potential rally. Support, on the other hand, will be found in the flexible market management policy of OPEC+ and the possible tightening of US sanctions on Venezuela and Iran. Libya might prove the wild card amongst producers whilst OPEC+ cohesion should remain strong.

Finally, the transition from fossil fuel to renewables will continue but will have to scale significant hurdles. New technologies are seen as the major force for the transition. Changes in policies might slow down the transition but will not derail it. The trend seen in the recent past, the growth in EV sales, and the prevalence of renewable power (particularly solar), is to continue in 2025. The rollout of low-carbon technology will accelerate.

The new year will be as unpredictable and complex as 2024 was – if not more. The key takeaways of the EI 2025 Outlook, as we interpret it, are as follows: oil demand growth will continue slow, ample supply together with abundant spare capacity will be an impediment to any rally (unless all hell breaks loose in the Middle East), and energy transition is now an irreversible process. Nonetheless, fragmentation and polarization necessitate continuous monitoring of the underlying driving forces.

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