China's oil demand recovery, non-OPEC supplies may tilt balances in 2025: Vitol CEO

China's positive oil consumption outlook for 2025 will likely aid a global demand recovery, but growing non-OPEC supplies have the potential to tilt the market balance going into next year, Russell Hardy, CEO of Vitol, told the FT Commodities Asia Summit Nov. 7.

"The Chinese picture has perhaps tempered people's views of future demand growth, but next year, we're expecting around 700,000 b/d of refined products demand growth globally, and obviously we're going to have to run 700,000 b/d more of crude oil to make the products to meet that demand," Hardy said.

On whether China's diesel and gasoline demand has peaked, he said, "We're a little bit unsure, I would say ... because, in the end, diesel demand has slowed down, principally because LNG has picked up. It's not happening in China specifically. It's not that energy demand is falling in China -- it has moved away from diesel into LNG."

China's oil demand is expected to grow 1.1% to 17.29 million b/d in 2024 and gain 1.7% in 2025 to 17.59 million b/d, according to forecasts by S&P Global Commodity Insights.

"In the supply side, particularly the non-OPEC supply side, there's still a little bit of growth left in it. So, there's a little bit of growth in the United States. There's a little bit of growth in Brazil. There's a little bit of growth in Guyana next year, which does mean that there's a little bit more of a supply pressure coming to the market," he added.

According to analysts at Commodity Insights, non-OPEC growth in 2024-25 is concentrated in the US and Canada -- in addition to Guyana, Brazil and China -- and this is why OPEC+ plans to increase production have become more complicated.

Canadian production is on a growth path and set to reach 5.1 million b/d in 2024 and 5.4 million b/d in 2025, with US output rising too. US and Western Canadian production will hit new highs in 2024-25, led by oil sands, and the launch of the TMX pipeline and export terminal in the second quarter has allowed for incremental export capacity out of Western Canada, analysts added.

Looking for answers

Commodity Insights expects Platts Dated Brent to average $81/b in 2024, but the market remains volatile at present. Despite ongoing tensions in the Middle East and other uncertainties, Commodity Insights sees an easing of Platts Dated Brent to the lower $70s/b in 2025, owing to expected production increases from both OPEC+ and non-OPEC+, coupled with a subdued global oil demand growth.

Vitol expects global crude prices to oscillate between $70/b and $80/b in 2025, reflecting some concerns over how demand and supply balances could potentially shape up, Hardy said.

"I think it's a little premature to conclude that the market is going to be oversupplied in 2025, although on paper today, if everything works, there'll be a little bit too much oil in 2025, but things don't always pan out exactly as expected," he said.

With the geopolitical tensions and uncertainties around the Middle East, as well as questions around Iranian and Venezuelan exports under a new US presidency, assumptions made previously that there will be more crude availability in 2025 may not hold, according to Hardy.

"The market is not in bad shape. Most products are backward. Crude is backward. Inventories are relatively low. Still, we don't have an oversupply market," Hardy said.

In the clean products market, Platts, part of Commodity Insights, assessed the spread between front-month and second-month FOB Singapore gasoil swaps at an average of 32 cents/b to date in Q4, flipping to backwardation after spending second and third quarter in contango structure. The gasoil swaps timespread averaged minus 9 cents/b in Q3 and minus 4 cents/b in Q2.

Way forward for US oil sector

Hardy said the oil industry's general expectation was that regulation for the sector could be relatively easier under a Donald Trump administration.

"The oil industry in the US is fairly robust and has a very clear plan. So the regulatory environment will be a little bit easier. You will have to ask the oil majors, but I don't think that massively affects their capex funds, because they've done M&A over the last two or three years. There have been a few mega mergers to pull Permian acreage together. They have a plan and that plan, I would say, would be independent of the political narrative," Hardy added.

According to source and Commodity Insights analysts, a second Trump administration would aim to increase US oil production by rolling back environmental regulations and expanding offshore and federal land leasing opportunities.