Middle East headwinds

Last year in the October 2024 issue of Hydrocarbon Engineering, the discussion centred on the efforts of oil producers to stabilise the market in the Middle East, likening their role to “oil market shepherds.” The Middle Eastern oil producers and other key international producers have worked together since December 2016 via the Declaration of Cooperation (DOC.) The DOC countries are also known as the OPEC+ Group. OPEC’s membership currently consists of Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Republic of the Congo, Saudi Arabia, the United Arab Emirates (UAE), and Venezuela. Ecuador, Indonesia, and Qatar are former OPEC members. Producer countries meeting with OPEC in 2016 were Azerbaijan, the Kingdom of Bahrain, Brunei Darussalam, Equatorial Guinea (which joined OPEC in 2017), Kazakhstan, Malaysia, Mexico, the Sultanate of Oman, the Russian Federation, the Republic of Sudan, and the Republic of South Sudan.

Despite geopolitical risk factors, the oil market had been stabilising in the post-COVID-19 years, and prices had been strong. Now, the year 2025 is bringing market headwinds. Critical market indicators are sliding down, and uncertainty is creating caution. International agencies includ-ing OPEC, the International Energy Agency (IEA), and the US Energy Information Administration (EIA) have noted these trends, and they have revised downward their forecasts of oil demand, prices, and exploration and development.

Behind this year’s market turbulence was a new and largely unforeseen force: President Trump’s declaration of national emergency over the US trade deficit, and the use of this power to launch a tariff programme affecting every country in the world. The US government stated that tariffs were needed to counteract foreign policies that undercut US businesses and work-ers. The goals include reducing reliance on imports, stimulating investment in US production and jobs, and realigning trade patterns by offering lower tariff rates to countries that sign re-ciprocal deals. Although tariffs are a common economic tool, the sweeping nature of the US tariffs, and the hectic pace of bilateral negotiations, were unexpected, and they have caused economic uncertainty. While a detailed examination of tariff impacts on global trade is beyond the scope of this article, it is undisputable that the oil markets of the Middle East are affected. This article explores the emerging headwinds and the Middle Eastern oil market.

Headwinds 2025

The global oil market has had more than its share of ups and downs. The global oil market col-lapsed during the COVID-19 pandemic, then recovered in fits and starts before Russia’s inva-sion of Ukraine caused a sharp price spike. The years 2023 - 2024 saw renewed stability. Now in 2025, headwinds and cautionary signs are appearing, including:

• From January 2025 to August 2025, Brent crude spot prices have fallen 13%.
• Additions to global oil demand are slowing. OPEC¹ reports that 2.6 million bpd of demand were added in 2023, falling to 1.5 million bpd added in 2024, and falling again to an expected 1.3 million bpd in 2025.
• Additions to global liquids production are slowing. OPEC reports that non-DOC producers added 2.8 million bpd to supply in 2024, falling to 1.5 million bpd in 2024, and falling to an expected 0.9 million bpd in 2025.
• DOC crude production declined 0.8 million bpd in 2023 and 1.2 million bpd in 2024. The DOC plans to expand production in 2025, and OPEC reported that 2Q25 production was 0.4 million bpd higher than 2024 production.
• The world rig count increased by 41 in 2023, but fell by 81 in 2024, and in 2Q25 fell 139 below the 2024 count.

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Reference

1. OPEC Monthly Oil Market Report, various issues.

Read the article online at: https://www.hydrocarbonengineering.com/special-reports/20102025/middle-east-headwinds/