U.S. Oil: President-elect Donald Trump stated that the European Union (EU) may face tariffs unless it reduces its trade deficit with the U.S. by purchasing more oil and gas. The EU already imports a significant portion of its energy from the U.S., but additional volumes are limited without increased American production or rerouting from Asia. Trump emphasized that the EU must make large-scale purchases of U.S. energy resources, or tariffs would be imposed. The European Commission expressed willingness to discuss strengthening ties, including in the energy sector. Despite the EU’s growing energy imports from the U.S., it still faces a substantial trade deficit with the U.S. in goods, while the U.S. has a surplus in services. Trump has pledged tariffs on major trade partners, including Canada, Mexico, and China, and the U.S. has become the largest oil and gas producer globally.

Russia:  President Vladimir Putin issued a decree allowing foreign buyers of Russian gas to pay in rubles through other Russian banks, bypassing the U.S.-sanctioned Gazprombank, effective until April 1. This move comes as Russia's gas transit deal with Ukraine, which supplies about half of Russia's gas to Europe, is set to expire on December 31. Putin confirmed there would be no new transit deal with Ukraine but stated Russia would manage without it. Despite previous attempts, European buyers of Russian gas remain unclear if this new arrangement will resolve payment issues. Meanwhile, Hungary, Slovakia, and Austria are most affected by the disruption of Russian gas through Ukraine, with Moldova's Transdniestria region also facing a halt in supply.

BP: BP has reached an agreement with the Iraqi government on the technical terms for redeveloping the Kirkuk oil and gas fields. This follows a previous deal signed in August to develop and explore the Kirkuk oilfield, which will also involve building power plants and solar capacity. Iraq, the second-largest oil producer in OPEC, has the capacity to produce nearly 5 million barrels per day. BP’s Executive Vice President, William Lin, called the signing an important step toward finalizing the contract, with negotiations expected to wrap up in early 2025. The new deal is anticipated to offer a more generous profit-sharing model than previous contracts, which historically left foreign companies with slim margins. BP has not disclosed specific details on whether the redevelopment will be structured as a technical service contract or a profit- or production-sharing model. BP, which was part of the consortium that discovered oil in Kirkuk in the 1920s, estimates the field holds about 9 billion barrels of recoverable oil. Additionally, BP holds a 50% stake in the joint venture operating the Rumaila oilfield in southern Iraq, where it has operated for a century.

Market Overview: Oil prices fell on Friday due to concerns about demand growth in 2025, particularly in China, with global benchmarks set to end the week down over 3%. Sinopec's forecast that China's crude imports and oil consumption could peak by 2025 and 2027 respectively added to the uncertainty. Analysts highlighted that crude prices are in a consolidation phase, with OPEC+ requiring supply discipline to stabilize prices amid ongoing demand growth revisions. JPMorgan predicts a shift from balance to a 1.2 million barrels per day surplus in 2025, driven by increased non-OPEC+ supply and stable OPEC output. Additionally, a stronger U.S. dollar and potential tighter measures on Russian oil also contributed to the pressure on oil prices.

India has become the leading source of growth in global oil consumption for 2024 and 2025, surpassing China for the first time. Historically, China outpaced India in oil consumption growth from 1998 to 2023. Over the next two years, India is expected to account for 25% of global oil consumption growth, with a 220,000 b/d increase in 2024 and 330,000 b/d in 2025, driven by rising demand for transportation fuels and home cooking. In comparison, China’s consumption will grow by 90,000 b/d in 2024 and 250,000 b/d in 2025, with limited growth in transportation fuels due to factors like electric vehicle adoption and economic slowdown. Despite India's rapid growth, China still consumes much more oil, with 2023 consumption at 16.4 million b/d compared to India's 5.3 million b/d. Overall, India’s consumption growth is the largest in both volume and percentage terms, marking a shift in global oil consumption patterns.

Oil prices were little changed on Friday as markets balanced concerns over Chinese demand and expectations of interest rate cuts following U.S. inflation data. U.S. West Texas Intermediate crude rose slightly by 8 cents to $69.46 per barrel, with the U.S. dollar retreating from a two-year high but still on track for a third consecutive week of gains. The cooling U.S. inflation in November helped ease fears about the Federal Reserve abandoning market support, while a weaker dollar and potential rate cuts could stimulate economic growth and oil demand. Sinopec's outlook for China, predicting a peak in crude imports by 2025 and oil consumption by 2027, added to demand concerns. Meanwhile, OPEC+ revised its demand growth forecast for 2024 and, with potential supply changes, the oil market is expected to shift from balance to a surplus in 2025.

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