Ed Crooks, Vice President of the British company Wood Mackenzie, published a report titled “Predictions for Energy and Natural Resources in 2025,” which surveys and compiles forecasts from the company’s analysts regarding market trends for the current year. Crooks notes that Wood Mackenzie’s predictions for energy markets in 2024 have already materialized in parts during the past year, including—but not limited to—an increase in interest in nuclear energy, maximizing efficiency gains in the U.S. oil industry, a slowdown in final investment decisions for LNG projects, advancements in carbon capture and storage technology, worldwide carbon compensation developments, and a growing interest in geological engineering in Europe and the Americas, among other things.
The report confirms that the momentum of some of these trends is likely to continue into 2025; however, other emerging trends will also gain public attention that were previously in the process of developing. Below, we present Wood Mackenzie’s forecasts on oil and other natural resource markets for 2025:
Global Oil Market Volatility: Wood Mackenzie believes that international political events will significantly impact the global oil markets in 2025, considering the growing geopolitical risks with the potential fall of the Assad regime in Syria, the weakening of Iran, and the unresolved conflict between Israel and Hamas and Hezbollah. These turbulent conditions signal new volatility in the global oil market. According to Wood Mackenzie’s base case scenario, global oil consumption is expected to rise by 1.4 million barrels per day next year. However, this rate might drop by a third if President-elect Donald Trump follows through on his plan to impose sharp tariff increases upon taking office, which could provoke retaliatory measures from other countries. Generally, imposing tariffs means slower global growth and higher oil product prices for end consumers. Supply disruptions are also escalating, as weak demand growth will pressure OPEC+ nations in their market management attempts. Signs of market weakness have led the OPEC+ alliance to delay the planned easing of voluntary production cuts from January to April next year; production outside OPEC is also forecasted to rise by 1.4 million barrels per day in 2025.
Accelerated Global Diesel Market: Global demand for diesel fuel is expected to recover in 2025, driven by rapid growth in global industrial output. However, it will remain below pre-COVID levels. Global industrial output is likely to increase by 13% in 2025 compared to 2019, but diesel demand is expected to be 0.6% lower than in the same period. This shift is primarily due to China, where oil demand is anticipated to continue rising in 2025; however, most of this growth will be attributed to the petrochemical industry’s demands, while fuel demand from the transport sector is likely to decline. Reduced gasoline and diesel demand from land transport will be offset by growth in aircraft fuel consumption. The impact of electric vehicles and LNG-fueled trucks is now significant in the Chinese market.
Trends in National Oil Companies (NOCs): International oil companies face a formidable task of balancing capital allocations in 2025. Generally, their institutional discipline will translate into budgets with fixed capital expenditures, alongside supporting profit distributions and share buybacks. Conversely, a select group of NOCs will lead growth in the oil industry as their investments in upstream activities (especially through the gas industry chain) are expected to increase, while these companies are likely to retain their strategic investment positions in downstream activities. While NOCs in the Middle East possess the largest available liquidity, Asian NOCs could also play a larger international role again. NOCs are likely to spearhead investment in low-carbon technologies, as national objectives and the desire to generate cash flows will see them outspending their European counterparts on low-carbon product activities. Overall market uncertainty may lead to bolder strategic moves by Middle Eastern NOCs, such as purchasing trading houses or becoming strategic investors in global oil companies; this would be a logical next step for an ambitious national oil company aiming to enhance its global presence.
Significant Gains from Mergers and Acquisitions: Updated estimates of synergies and integration from mergers and acquisitions are very positive news for the U.S. oil and gas sector. Expand Energy, formed from the merger of Chesapeake and Southwestern, achieved its synergy target. Deal gains rose by 25% post-closure last October, and ConocoPhillips’ latest synergy numbers from its acquisition of Marathon Oil doubled the initial estimate. ExxonMobil has just boosted merger gains with Pioneer Natural Resources by 50% to $3 billion annually. These consistently strong figures set a high benchmark for future merger activities in the United States. It is unlikely that 2025 will witness the same level of merger and acquisition spending as in 2023 and 2024. Overall, ongoing deals will need to have significant and reliable synergy targets or risk receiving a weak market return.
Slowdown in LNG Projects in the U.S.: President-elect Donald Trump pledged to cancel, on his first day in office, the Biden administration’s decision to halt new LNG export license approvals. Some industry observers anticipate a new wave of U.S. LNG investments in 2025. Overall, securing new approvals represents a welcome advancement for many projects; however, it may not be the final obstacle to overcome before making a final investment decision. Some projects are already facing legal challenges, and others may be targeted after the release of U.S. Department of Energy reports on the environmental and economic impact of U.S. LNG exports. Additionally, projects will need to finalize engineering, procurement, and construction contracts at a time of rising costs, which may create issues with gas buyers and project financiers. Some projects are better positioned than others and could move toward making a final investment decision in 2025; however, the next wave of new investments in U.S. LNG may only materialize in 2026.
Stability of Global Solar Installations: Over the past five years, annual new solar installations worldwide have increased, but this growth is expected to fade in 2025 and remain stable at current levels until the 2030s. From 2019 to 2024, the average annual growth rate for global solar installations was approximately 31%. Global solar installations are expected to slightly decrease in 2025 to 492 gigawatts, a decline of 0.4% compared to 2024. The limitations of the energy market in several key markets are increasingly becoming significant obstacles to investment. Limited grid capacity and the growing need to reduce solar generation will slow the construction of additional new capacities. Meanwhile, China, which accounts for over 50% of all global solar installations, is expected to serve as the primary market driver. In contrast, some other important markets will face notable declines. In India, installations decreased after an earlier rise in 2024, as developers hurried to preempt the reimposition of regulations mandating companies to use local solar modules. Additionally, the Brazilian market is affected by rising tariffs on imported units.
Storage Market Growth in Emerging Markets: Storage solutions are thriving in many emerging markets at a rapid pace. Countries like Turkey and Bulgaria are expected to attract significant investments in storage, integrating storage solutions into solar and wind energy project bids. Saudi Arabia is also likely to emerge as a promising storage market, as new battery storage capacities to be installed over the next decade will position it among the top ten global markets in this field. This remarkable growth in the Kingdom’s storage market is driven by ambitious Vision 2030 goals and substantial investments in renewable energy projects.
Dominance of U.S. Blue Hydrogen in Supply Additions: Blue hydrogen, derived from natural gas with carbon capture, will solidify its status as a leading force in the U.S. low-carbon hydrogen industry by 2025. Projects with a capacity exceeding 1.5 million tons per year are set to reach the final investment decision stage, enhancing the U.S.’s position as the largest producer of blue hydrogen in the world. Investment will receive a significant boost from the tax credit granted for carbon capture technology under the 45Q provisions of the U.S. Internal Revenue Code. This support will help enhance the financial feasibility of blue hydrogen projects and maintain the outstanding position of low-carbon hydrogen products in the U.S., along with the potential for exports to international markets, including Japan and South Korea. At the same time, green hydrogen will struggle due to the Trump administration’s tepid stance on decarbonization, alongside regulatory uncertainty and competition for funding from lower-risk sectors; all this is likely to disrupt the development of green hydrogen projects. Consequently, the capacity of green hydrogen projects reaching final investment decisions is expected to be about one-tenth of the capacity of blue hydrogen projects in 2025.
Flourishing Carbon Credit Markets: The UN Climate Change Conference “COP 29” and the rules it established regarding global carbon markets represent a significant milestone in stimulating carbon offsets. The world has made significant progress in implementing Article 6 of the Paris Agreement, paving the way for governments to utilize carbon credits and assist in achieving national emission targets. For offsets to become a tool for financing emission reductions in the developing world, further work on methodology and infrastructure for recognizing and trading carbon credits is required. Countries will need to tackle the same challenge faced by corporate carbon offset buyers, which is to avoid disreputable projects. Governments, UN agencies, and independent initiatives are expected to ramp up efforts to enhance market integrity and establish new guidelines. If robust methodology and oversight can be established, UN-backed carbon trading under Article 6 will boost market credibility and also increase demand from businesses.
Potential Deals in the Global Copper Market: Major mining companies aspire for copper to become a key driver of their business growth, with a growing consensus on the metal’s central importance in the portfolios of the largest mining firms. While battery materials markets are expected to experience an oversupply in 2025, copper prices are likely to be supported by strong demand growth and delays in new projects.
The few assets for sale will attract interest from a range of state-owned and private companies, given the scarcity of new projects from major mining companies and slow permitting; this leaves the door open for new deals.
The market valuations of Anglo American and Teck Resources remain attractive and will continue to be primary targets for major mining firms seeking immediate additions to their copper production. BHP, Rio Tinto, and Glencore have sufficient financial resources to support such acquisitions.
Source:
Ed Crooks. (2024, December 13). Predictions for energy and natural resources in 2025. Wood Mackenzie. https://www.woodmac.com/blogs/energy-pulse/predictions-for-energy-and-natural-resources-2025/
