India's insatiable thirst for oil is reshaping the global energy landscape. The country's burgeoning economy, coupled with a growing middle class, has positioned it as the world's leading driver of oil demand growth.
According to the latest U.S. Energy Information Administration (EIA) Short-Term Energy Outlook1, India is expected to account for a staggering 25% of global oil consumption growth over the next two years. This surge in demand is being fuelled by increased vehicle ownership, industrialization, and a shift towards energy-intensive lifestyles.
Global Oil Market Tightens
The confluence of rising Indian demand and geopolitical tensions has tightened global oil markets. OPEC+ production cuts, coupled with ongoing geopolitical risks, have led to significant drawdowns from global oil inventories. As a result, Brent crude oil prices are expected to average $78 per barrel2 in the first quarter of 2025.
However, as global oil production gradually increases and inventories begin to rebuild, prices are projected to moderate. By the second half of 2025, the Brent price is forecast to fall to an average of $74 per barrel3.
Natural Gas Market Volatile
The natural gas market is experiencing significant volatility, driven by seasonal demand patterns and global LNG trade. The Henry Hub natural gas spot price is expected to rise in the coming months, averaging $2.80 per million British thermal units (MMBtu) in the first quarter of 20254. This increase is primarily due to increased winter demand for heating.
However, as temperatures rise and demand for heating declines, natural gas prices are expected to moderate. The Henry Hub price is forecast to average around $2.90/MMBtu in 2025, supported by growing global demand for U.S. LNG exports.
U.S. Energy Landscape
In the United States, natural gas production is expected to remain relatively stable in 2024, as low prices have curtailed production in some regions. However, a modest increase is anticipated in 2025, driven by growth in the Permian Basin.
The U.S. electric power sector is projected to experience a 3% increase in generation in 2024, primarily to meet rising air-conditioning demand during hotter summer months. Natural gas and solar power are expected to be the primary sources of this increased generation.
As the global energy landscape continues to evolve, India's growing energy appetite and geopolitical tensions will remain key factors shaping oil and natural gas markets.
Bibliography
1 https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf
2 https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf
3 https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf
4 https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf
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