Recently, the Energy Institute (EI) of the UK, in collaboration with A.T. Kearney and KPMG, released the "World Energy Statistical Yearbook 2025" (hereafter referred to as the "Yearbook"), whose data sheds light on the intricate dynamics of the energy transition. Although the energy transition is accelerating, oil's irreplaceable role in sectors such as transportation and chemicals is expected to persist for decades to come. Over the next decade, as demand peaks approach, supply structures undergo reshaping, and the push toward a low-carbon future intensifies, the global oil market will enter an even more complex phase of adjustment. Stakeholders must strike a delicate balance between short-term stability and long-term transformation, ensuring the sustainability of the global energy system.

Global oil consumption hits another record high

Global oil consumption reached 101.8 million barrels per day in 2024, marking a slight increase of 0.7% compared to 2023 and setting a new record. Over the past decade, oil demand has grown by an average of 1% annually, driven almost entirely by non-OECD countries.

The United States is the world’s largest oil consumer, accounting for 18.7% of global demand. In 2024, U.S. daily oil consumption edged slightly lower compared to 2023, yet it has still grown by an average of 0.5% annually over the past decade. This trend reflects a shift in the country’s energy consumption structure: improved fuel efficiency in the transportation sector and the growing popularity of electric vehicles have offset some of the rising demand, while increased chemical industry needs for feedstocks like naphtha have helped sustain overall consumption levels. Despite facing pressures from the ongoing energy transition, the U.S.’s massive economy and robust industrial base ensure that its central role as a major oil consumer will remain firmly intact—albeit temporarily—for the foreseeable future.

China is the world’s second-largest oil consumer, accounting for 16.1% of global demand. In 2024, China’s daily oil consumption fell by 1.2%, contrasting sharply with the average annual growth of 4% observed over the past decade—and signaling that demand may soon stabilize. The acceleration of transportation electrification, coupled with improved energy efficiency in industrial sectors and the growing shift toward clean energy alternatives, has collectively curbed oil consumption. Analysts speculate that China may already be nearing its long-term peak in oil demand.

In 2024, India's oil consumption grew by 3.1% to 5.6 million barrels per day. Driven by the country's robust economic growth of 6.5% annually and the expanding middle class—projected to reach 500 million by 2030—India is on track to surpass Japan within five years and become the world's third-largest oil consumer. This surge in oil demand across India spans multiple sectors: urbanization is boosting private vehicle ownership at an annual rate of 12%, while the expansion of the manufacturing sector is increasing diesel consumption. Meanwhile, the country's ongoing refinery capacity expansion—set to add 20 million tons per year by 2024—is further fueling the need for crude oil processing.

Oil demand in OECD countries edged up by a modest 0.1%, while non-OECD nations saw their oil demand grow by 1.2%. This divergence highlights a significant shift in the global energy consumption landscape: developed economies, influenced by aging populations, economic service-sector growth, and the ongoing energy transition, are entering a plateau in demand; meanwhile, emerging markets—driven by industrialization and urbanization—are increasingly becoming the primary engine of oil consumption growth.

Structural changes in global oil production

Global oil production reached 96.9 million barrels per day in 2024, surpassing the pre-pandemic peak by 1.8 million barrels and marking a 9% increase from the pandemic-era low—ushering in an all-time high. While this appears as a testament to market resilience and recovery, it actually conceals complex structural shifts beneath the surface.

In 2024, the United States ranked first globally in total oil production, reaching 13.2 million barrels per day. While this marked a record high, the 2% increase was only half of the average annual growth rate observed over the past decade (4.2%), suggesting that production may already be nearing a plateau. This trend is closely linked to declining investment returns in the shale oil industry, as well as accelerating declines in per-well output from core producing regions, such as the Permian Basin.

In 2024, Russia's oil production stood at 10.2 million barrels per day, a 3.1% decrease compared to 2023.

In 2024, Saudi Arabia's oil production fell by 4.2% to 9.2 million barrels per day, the lowest level since 2011. This decline was driven by OPEC+’s voluntary production cuts and Saudi Arabia’s strategic shift—prioritizing investments in refining and petrochemical industries, with refining and chemical investments accounting for 40% of the kingdom’s total energy-related capital expenditure in 2024—leading to reduced spending on crude oil extraction. Meanwhile, market concerns persist over the sustainability of Saudi Arabia’s remaining production capacity (currently around 2 million barrels per day), with some analysts suggesting that the country’s long-term output potential may be overstated.

Proven reserves are unevenly distributed across regions.

The Yearbook reveals that, as of the end of 2020, global proven oil reserves reached 1.7 trillion barrels—enough to sustain current production levels for 53.5 years. However, these reserves are extremely unevenly distributed across regions, profoundly influencing the global energy geopolitical landscape.

Among them, Venezuela ranks first globally with proven reserves of 304 billion barrels. However, the country faces a significant resource challenge: 90% of its reserves consist of heavy oil, which is notoriously difficult and costly to extract, driving up extraction costs to as high as $45 per barrel—and requiring specialized refining technologies. Moreover, due to ongoing political and economic turmoil, Venezuela's oil industry infrastructure has become outdated, and investment in the sector remains severely inadequate. As a result, actual production levels are barely one-fifth of the country's theoretical capacity, making it increasingly difficult to translate its vast reserves into reliable, real-world supply capabilities.

Saudi Arabia follows closely with reserves of 298 billion barrels, showcasing clear resource advantages. Light crude oil accounts for 70% of its reserves, and the cost of extraction is less than $10 per barrel. Moreover, its oil fields are highly concentrated and benefit from exceptionally favorable extraction conditions, making Saudi Arabia a "stabilizer" in the global oil market.

Iran ranks third globally with reserves of 158 billion barrels. Despite its abundant resources, the country has long been constrained by international sanctions, leaving its oil industry grappling with challenges such as restricted exports, stalled technological upgrades, and hindered capacity expansion. As a result, Iran struggles to fully leverage its reserve advantages, gradually becoming marginalized within the global oil supply system.

The United States holds reserves totaling 69 billion barrels, but these figures include only resources that are both technically feasible and economically viable to extract. The U.S. adopts a stricter definition of proven reserves—some resources counted as reserves in other countries may be excluded in the U.S. due to high extraction costs or technological limitations. Nevertheless, thanks to shale oil technology innovations, the U.S. has successfully tapped into unconventional resources, enabling it to maintain high production levels and offset the relatively modest size of its reserve base.

The global energy landscape may be reshaped.

The 2024 oil market data provided in the "Yearbook" reveals several trends reshaping the global energy landscape.

Saudi oil production has dropped to a multi-year low, marking not just a short-term output cut, but also signaling a strategic shift—from prioritizing "maximizing market share" to placing "price stability above all else." Against the backdrop of slowing global oil demand, Saudi Arabia is aiming to keep international oil prices above $80 per barrel by proactively reducing output, ensuring sufficient funding for its ambitious "2030 Vision." This pivot could potentially disrupt OPEC+'s coordination mechanisms and reshape the global logic of oil supply management.

The structure of U.S. oil production has undergone a notable shift, with the share of natural gas condensates rising to 34%. Shale oil extraction often yields significant amounts of natural gas condensates such as ethane and propane, which, while not directly suitable as transportation fuels, hold greater value as essential raw materials for the chemical industry. This trend is driving the U.S. refining industry toward an "integrated refining and petrochemical" model, enabling the production of high-value-added chemical products, reducing reliance on conventional crude oil alone, and enhancing the resilience of the entire industrial chain against market risks.

Global oil reserves have stalled in their growth: from 2014 to 2024, newly proven reserves averaged less than 10 billion barrels per year—just one-third of the consumption rate during the same period. Under pressure from the energy transition and ambitious carbon reduction targets, oil companies are adopting a cautious approach toward long-term exploration projects, resulting in upstream investments that have declined by 30% compared to their 2014 peak. If future demand continues to rise while reserve replenishment remains inadequate, the global oil market could face an supply gap after 2030.

India's oil production accounts for only 15% of its consumption, yet in 2024, its crude oil imports surged by 8%, making it the largest incremental market for global crude oil imports. India's energy policies significantly influence the flow of global oil trade: With a strategic reserve-building target of 150 million barrels, the country is set to boost short-term import demand. Meanwhile, its refining capacity is slated to expand to 800 million tons per year by 2030, enhancing India's role in the global oil product trade. Additionally, the rapid pace of renewable energy development could disrupt the trajectory of rising oil demand, emerging as a key variable that will shape the balance of the oil market.

Guyana has achieved leapfrog development, with its daily oil production soaring from zero to over 600,000 barrels within just five years—making it one of the fastest-growing oil-producing nations in recent years. This remarkable growth is driven by the large-scale development of the Stabroek Block, which holds proven reserves of up to 11 billion barrels. By 2027, the block is expected to reach a daily output of 1 million barrels. Within the next decade, Guyana could rise to become one of the world’s top five oil producers, reshaping the energy landscape of the Americas and introducing a new dynamic into global supply dynamics—potentially challenging OPEC’s market influence.

The oil market faces lingering concerns about volatility amid a fragile balance.

In 2024, the global oil market is maintaining a fragile balance: the gap between production and consumption remains below 1%, while Brent crude oil’s monthly price volatility has dropped to less than 15%, reflecting relative stability. However, several key factors supporting this equilibrium remain uncertain, raising concerns that the market could experience significant fluctuations in the future.

The OPEC+ coordination mechanism is facing a critical test, as the internal compliance rate for production cuts has dropped from 80% to 65%, highlighting growing divisions among member countries. While some Gulf nations prefer maintaining the current cut measures to support oil prices, others—particularly those grappling with severe fiscal pressures—are pushing for increased production to ease their economic challenges. This underlying tension could weaken OPEC+'s ability to effectively manage global oil markets. If coordination ultimately breaks down, the world could see either a temporary surplus or shortage in oil supply, disrupting the current delicate balance.

The sustainability of the U.S. shale oil industry is in question, as the breakeven price has risen to $65 per barrel. At current oil price levels, companies are showing diminished investment appetite. Without significant reinvestment, shale oil production could decline over the next three to five years. As a flexible source of global supply, fluctuations in shale oil output may heighten market uncertainty—especially when supply growth in other regions remains sluggish.

Geopolitical risks are also a significant factor—tensions in the Middle East, geopolitical conflicts in Europe, and policy shifts in oil-producing countries in Latin America could all potentially trigger sudden disruptions to oil supplies.

Additionally, the uncertain pace of the global economic recovery and the speed of the energy transition could impact market balance. If Asian economies experience a stronger-than-expected economic rebound, oil demand may surge rapidly; conversely, if Europe accelerates its energy transition, demand could decline faster than anticipated. These intertwined variables leave the oil market poised for both stability and heightened tension, with its trajectory having far-reaching implications for global inflation, trade balances, and energy security.

Source: China Petroleum & Chemical News