Red Sea Attacks Pause: Maritime security officials expect Yemen's Houthi militia to announce a halt in attacks on ships in the Red Sea following the Gaza ceasefire deal between Israel and Hamas. The group's leader, Abdul-Malik al-Houthi, is expected to address the matter in a speech. The Houthis have conducted over 100 attacks on vessels since November 2023, in support of Palestinians, causing significant disruptions in global shipping. A key indicator of returning stability will be seen in the insurance market, where fees are expected to drop as shipping resumes.
IEA on Russian Sanctions: The International Energy Agency warned that the latest U.S. sanctions on Russia and Iran could disrupt their oil supply chains, potentially tightening the global market. However, the IEA still predicts a surplus in the global oil market in 2025, as supply growth from non-OPEC+ countries exceeds the slower expansion in world demand. The IEA held off incorporating the full impact of the sanctions on Russian and Iranian exports into its supply forecasts, but acknowledged they could lead to a tightening of oil balances. It also revised its global oil demand growth forecasts, adjusting 2024 growth upwards and 2025 growth slightly down, partly due to economic challenges in China.
OPEC 2025 Demand Forecast: OPEC held steady on its oil demand growth forecast for 2025, expecting an increase of 1.45 million b/d this year and 1.43 million b/d in 2026, driven by transportation fuels. Chinese demand is forecast to rise by 310,000 b/d in 2025, supported by ongoing government stimulus. The cartel raised its global economic growth estimate to 3.1% for 2025 and projects 3.2% growth in 2026, while inflation is expected to gradually decline in the coming years. OPEC also expects non-OPEC supply growth to be 1.1 million b/d in 2025, with key contributors including the U.S., Brazil, Canada, and Norway.
Market Overview: Oil prices are moving lower to start Friday but are still on track for a fourth consecutive week of gains, driven by concerns over potential supply disruptions following new U.S. sanctions on Russian energy trade. Investors are in a "wait and see" mode, assessing the impact of these sanctions and their broader implications. Additionally, expectations of a ceasefire between Israel and Hamas, coupled with hopes for improved demand, helped support oil prices. Traders are also looking at economic data from the U.S. and China, which is contributing to a cautiously optimistic market outlook.
In the January Short Term Energy Outlook published by the EIA, they estimate U.S. crude oil production set a record of 13.2 million barrels per day in 2024. They expect U.S. producers will continue to produce more crude oil in both 2025 and 2026, but expect production growth to slow notably in 2026. The EIA forecasts annual average crude oil production in the United States will reach 13.5 million b/d in 2025, up 3% from 2024, before rising by just 1% to reach 13.6 million b/d in 2026. EIA forecasts the Permian region will be the largest source of U.S. production growth in both years and the only major source of production growth in 2026. Regions outside of the Permian see a slowdown in production growth. Production outside of the Permian region in the Lower 48 states will remain flat in 2025, and they forecast it will decrease by about 4% in 2026. Lastly, they forecast crude oil production in the Gulf of Mexico will increase to 1.8 million b/d in 2025 and remain near that volume in 2026.
Oil prices dipped on Friday but were still on track for a fourth consecutive week of gains, driven by concerns over U.S. sanctions on Russian energy and the potential for supply disruptions. The Biden administration's sanctions are tightening supply in key markets like Europe, India, and China, which are scrambling for oil. Additionally, expectations of a ceasefire agreement in Yemen, easing the impact of Houthi militia attacks on shipping, provided some pressure to prices. The market also took note of easing U.S. inflation and the potential for interest rate cuts, which boosted demand expectations. However, China's oil refinery throughput fell in 2024, signaling weaker demand and affecting global market sentiment.
