In an era marked by the significant intertwining of global economies, the oil and gas market exemplifies this trend of expansive globalizationResources in these sectors are not confined to national boundaries; rather, they flow seamlessly on the global stage, with pricing mechanisms reflecting international standardsThe movements of major powers, geopolitical conflicts, shifting economic stability, climate change, speculative trading, and alternatives in energy sources are just a few of the myriad factors that exert influence over the fluctuations in global oil and gas pricesHowever, the core driving force for these prices remains rooted in the fundamental principles of supply and demand.

The year 2024 anticipates a semblance of balance in the global oil market, while the natural gas sector may exhibit a looser demand and supply dynamicA general decline in international oil and gas prices is projected as industry experts foresee the supply-demand landscape evolving further into a relaxed state by 2025. Notably, the projected center of international oil prices indicates a downward trend, which is reflective of these shifting dynamics.

When examining the situation in China, the China National Petroleum Corporation's Economic and Technological Research Institute (CNPC Research Institute) has made insightful forecastsThe director of the institute, Lu Ruquan, anticipates that China's oil consumption will enter a plateau stage sooner than expected, with an estimated year-on-year increase of 1.1% expected in 2025, leading to a total of approximately 765 million tonsThis anticipated peak consumption level is lower than earlier projectionsFurthermore, natural gas consumption in China is set to reach an impressive 448.5 billion cubic meters by 2025, marking a substantial 6.2% year-on-year increase.

Delving deeper into the oil market reveals an environment of abundant supply, suggesting potential downward pressure on price levelsAs of 2024, a balanced yet slightly loose international oil market is anticipated

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Despite ongoing geopolitical conflicts and OPEC's commitment to maintaining production cuts, countries outside of OPEC—most notably the United States—have ramped up production significantlyOn the demand side, slowing global economic growth coupled with the accelerated adoption of renewable energy sources leads to relatively weak market demand.

The price of oil is expected to recede when compared to the preceding yearFor example, average prices for Brent crude oil futures are projected to be approximately $79.86 per barrel in 2024, representing a 2.8% decline year-on-yearIn refinery markets, global refinery capacity continues to expand, but operational rates are anticipated to drop from an average of 80% in the previous year to 78.8% in 2024.

Looking ahead to 2025, the CNPC Research Institute foresees an increasingly lax global oil environment, suggesting that the world may enter a phase characterized by inventory accumulationThe projected average price range for Brent crude oil futures sits between $65 and $75 per barrel as the market adjusts to what experts believe will be considerable oversupply combined with tepid demand increases of only around 800,000 barrels per day, amounting to a global total demand of approximately 103.7 million barrels.

Wang Nengquan, a member of the National Energy Expert Advisory Committee, indicated that current international oil prices carry a risk premium derived from geopolitical tensionsHe posits that should these tensions ease, oil prices could potentially drop by $10 to $20 per barrel by 2025. During the 14th Five-Year Plan period, the CNPC Research Institute's vice president, Wu Mouyuan, identified Asia-Pacific remains a significant engine of growth for oil demand, contributing to over half of global incremental demand, with India leading as the country with the largest increase.

When considering the domestic oil market in China, a downward trend in gasoline demand is anticipated following peak consumption in 2023. Notably, the CNPC Research Institute projects that domestic refined oil demand will be approximately 382 million tons in 2025, marking a reduced year-on-year decline of just 1.9%. The promotion of electric vehicles shows a notable impact on reducing demand for oil in the transportation sector

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The expectations for 2025 include a gasoline consumption figure of around 153 million tons, reflecting a decline of 3.4% that has expanded by an additional 0.3 percentage points.

The rise of electric vehicles is driving traditional gas stations to transition into holistic energy service stationsTaking the lead in this transformation are two dominant state-owned petroleum companies that operate over half of the country's gas stationsSinopec has formed partnerships with electric vehicle manufacturers like NIO and Li Auto to enhance charging services, while PetroChina in 2023 acquired an industry-leading company in the charging landscape, renaming it PetroChina Kunlun Internet-Energy Technology Co., Ltd. to aggressively build out its positioning in electric charging infrastructure.

The global natural gas landscape is similarly characterized by ample supply, although demand growth is anticipated to slowAs 2024 unfolds, global natural gas inventories will likely be at near five-year highs, contributing to a looser supply-demand dynamic and a corresponding decline in international gas pricesFor instance, the average spot price for Europe's TTF is projected to be approximately $10.9 per million British thermal units—a sharp year-on-year decrease of 15.3%. The Northeast Asia LNG spot prices may drop to around $11.8 per million BTUs, down 26.6% from previous figures, while American HH prices are expected to yield an average of $2.2 per million BTUs, reflecting a 13.6% decrease.

As we advance to 2025, the CNPC Research Institute predicts a slowdown in global gas demand growth due to a frail supply-demand balanceFrom the supply perspective, global natural gas production is estimated at approximately 4.49 trillion cubic meters—an increase of around 2.3%. North America and the Middle East remain key regions for natural gas production expansionIn terms of demand, global consumption could reach about 4.15 trillion cubic meters, reflecting a modest growth of 1.5%, primarily driven by increasing needs in Asia.

Furthermore, comparing pipeline gas to LNG reveals that LNG enhances natural gas flow diversity via shipping and vehicular transportation options

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The price ratios in 2024 between the U.S., Europe, and Asia are poised to reflect increasing interdependencies, projected at 1:5:5.4 respectivelyThis global flow of LNG resources allows for synchronized price movements across these regional markets.

Europe's proactive stance toward diversifying away from Russian energy supplies is further aided by robust LNG international tradeThe CNPC Research Institute foresees that by 2025, Europe will require an additional 10 million tons of LNG to compensate for supply gaps caused by shortages from Russian gasThe U.S. is predicted to emerge as the main contributor to this increased supplyForecasts indicate that European and Asian gas prices may stabilize while U.S. prices experience a discernible rise, establishing expected ranges for the TTF between $10.5 to $12.0 per million BTUs and Northeast Asia's LNG between $11.5 to $13.0 per million BTUs, alongside U.SHH prices ranging from $2.7 to $3.5 per million BTUs.

Wang Nengquan has echoed this sentiment, noting that as the EU gradually commissions LNG import infrastructure and enhances connectivity within its gas networks, it is well poised to reduce reliance on Russian natural gas by 2025. The evolving landscape of energy trade in Europe is reshaping global trade patterns, with Shanghai Jiao Tong University's Carbon Neutral Development Research Institute's assistant researcher, You Ting, suggesting that Europe's ramped-up imports of U.S. and Middle Eastern LNG may incite fluctuations in international gas prices, influencing other related energy products in the processThis trend compels the EU to reassess its energy investment and development strategies in favor of renewable and alternative energy solutions.

Addressing this complex issue, Yang Hanfeng, a seasoned energy strategy expert, remarked that Europe is gradually acclimatizing to its life without Russian gas while quickly discovering alternative energy solutions from new suppliers like the U.S., Qatar, and Turkey

However, the continuous search and procurement of gas resources by European buyers amplify market uncertainties, potentially exacerbating short-term resource shortages and resulting in pronounced volatility in global natural gas prices.

For China, Yang believes that the nation has successfully diversified its natural gas import sources, where long-term contracts constitute a significant portion of the importsProvided that all parties adhere to their contractual obligations, China’s imports will remain stable overallHistorically, China has maintained a high level of dependency on international oil and gas imports, yet recent developments have showcased considerable achievements in increasing domestic oil and gas reserves and productionIn 2024, China’s total oil and gas output is projected to surpass 400 million tons of oil equivalent for the first time, reaching a crude oil production of 213 million tons—nearing historical highs—and natural gas output forecasted to hit 246.4 billion cubic meters, with an eighth consecutive year of increases exceeding 10 billion cubic meters.

Over the sum of six years, China’s marine crude oil production has accounted for a staggering 70% of the country’s overall increase in oil production, establishing a solid foundation for maintaining the nation’s crude oil output of 200 million tonsThe Deputy Director of the Oil and Gas Division at the National Energy Administration, Hu Jianwu, affirmed that the NEA intends to stabilize national crude oil output above 200 million tons by 2025 while ensuring continuous growth in natural gas production, resolutely safeguarding the security of the country's oil and gas supply.

According to estimates from the CNPC Research Institute, China's natural gas imports for 2024 are projected to be around 184.1 billion cubic meters, reflecting an 11.2% year-on-year increase, resulting in an impressive foreign dependency rate of 43.6%, rising by 1.3 percentage points from the previous year

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