The reshaping of the global crude oil market in 2024: changes in geopolitics and supply and demand will trigger major changes in the export pattern!

The Zhitong Finance App learned that in 2024, the global crude oil export market experienced its first decline since the COVID-19 outbreak, with a decline of 2%. This trend is mainly due to weak demand growth and trade route adjustments due to changes in refinery and pipeline layout.

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According to information, the Russian-Ukrainian conflict and the Middle East war have further exacerbated the chaos of global crude oil transportation, prompted changes in tanker transportation routes, and the division of suppliers and buyers into multiple regional camps. Oil exports from the Middle East to Europe have declined significantly by 22%, while more US and South American oil is flowing to Europe, while Russian oil is shifting to India and China. This series of changes is becoming more evident in the context of attacks on Red Sea shipping and the closure of European refineries.

Specifically, the decline in crude oil exports from the Middle East to Europe reflects a major shift in global oil trade flows. This transformation not only reshaped the oil supply chain, but also spawned new opportunistic alliances, such as close ties between Russia and India, and China and Iran. This shift has caused oil to no longer simply follow the lowest-cost flow path, leading to shipping constraints, rising freight costs, and ultimately affecting refining profits.

The booming US shale oil industry has made it a beneficiary of this transformation, with oil exports surging and increasing its global market share to 9.5%, second only to Saudi Arabia and Russia.

Furthermore, the launch of a large-scale refinery in Dangote, Nigeria, the expansion of the Canadian cross-mountain pipeline, the decline in Mexican oil production, the brief interruption of Libyan oil exports, and the rise in Guyanese oil production have all contributed to the further complication of global oil trade routes.

In 2025, suppliers will face the challenge of falling fuel demand in major consumer centers such as China, while more countries are switching to natural gas and renewable energy, further increasing market uncertainty.

Eric Brookhuysen, marine research and consulting manager at shipbrokerage company Poten & Partners, notes that this uncertainty and volatility have become the new normal, and 2019 is seen as the last “normal” year. Changes in oil demand forecasts have disrupted long-held market growth assumptions, with demand weakening particularly in China and Europe.

Last year, China's crude oil imports fell by about 3% as electric cars and plug-in hybrid vehicles became more popular, and the use of liquefied natural gas in heavy trucks increased. In Europe, declining refining capacity and government directives to reduce carbon emissions have reduced crude oil imports by about 1%.

On the supply side, the emergence of new suppliers and transportation routes has also reshaped the market landscape. European refiners turned to US and Middle Eastern oil after the Russian-Ukrainian conflict escalated, and rising shipping costs in the Red Sea prompted them to increase imports from the US and Guyana.

In 2024, oil exports from Iraq fell by 82,000 b/d, and the United Arab Emirates decreased by 35,000 b/d. Meanwhile, European imports from Guyana increased by 162,000 b/d and 60,000 b/d from the US. At the end of September, the escalation of the Middle East conflict and concerns that US President-elect Donald Trump might implement further sanctions strained Iran's oil supply and increased prices. This prompted Chinese refiners to turn their eyes to West Africa and Brazil's oil supply.

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Meanwhile, Nigeria's newly built Dangote refinery boosted the country's crude oil exports, led to a decrease in exports to Europe, and even an abnormal situation of crude oil imports to the US.

According to Kpler data, Nigeria's newly built Dangote refinery consumes a large amount of domestic supply, keeping the country's crude oil exports around 13% in 2024, up from 2% in 2023. This has led to a decline in Nigeria's exports to Europe, while Nigeria also imports 47,000 barrels of US WTI crude oil every day, which is unusual for a major net exporter.

Additionally, new refining capacity in Bahrain, Oman, Iraq, and Mexico's Dos Bocas may absorb oil production in these regions. In Canada, the expanded cross-mountain pipeline can now transport an additional 590,000 barrels/day of oil to the Pacific coast, and the country's water transport exports will reach a record 550,000 b/d by 2024.

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This had a ripple effect: as more Canadian crude oil flowed to the west coast of the United States, refineries in the region bought less Saudi and Latin American crude oil, while direct Canadian shipments to Asian countries reduced US re-exports along the Gulf Coast.

Analysts pointed out that although China is the main buyer of Canadian crude oil, India, Japan, South Korea, and Brunei have also found importers, and more Asian refiners are likely to buy Canadian crude oil. Analysts said that Trump's proposed 25% tariffs on Canada and Mexico, the two largest foreign oil suppliers to the US, could also change the oil flow situation in 2025.