Oil in 2025 and 2026 with supply increasing. Saudi Aramco is the main player

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By Marek Grzybowski

Oil tankers and fuel terminals will have more work in 2025 and 2026 than in 2024, even though oil giants are in no hurry to implement President Donald Trump’s “drill, baby, drill” slogan. Wall Street expects American oil companies to keep their spending in check in 2025 and focus on generating profits for shareholders. Global production is set to increase by 1.7 million barrels per day in 2025. This is good news for importers. They can count on an increase in oil supply and lower energy prices within two years.
The oil market in 2025 will react strongly to geopolitical turmoil and political decisions. It is assumed that American oil companies will be cautious about increasing the supply of oil and gas to global markets in 2025. Analysts believe that corporations will focus on generating profits for shareholders, suggests Banchero Costa Research in its latest report.

Major oil companies are already starting to report results for the fourth quarter of 2024. However, preliminary profit estimates are still based on the first 3 quarters. It is expected that there may be a certain discrepancy between the actions of oil companies and Trump’s announcements about maximizing oil and gas production. Investors are also reacting nervously to the words of the US President, expecting an increase in profits from oil trading in 2025 and 2026. The main player in the oil market will remain Saudi Aramco with profits estimated at USD 216.88 billion achieved in the last four quarters.

Sinking profits
“Shares of the No. 1 U.S. oil producer fell 1.7% to $107.72 in late January 2025, mirroring declines in the S&P 500 Energy Sector Index,” Reuters reports, noting that “global oil demand was weaker than expected in 2024, pushing down oil and fuel prices and weighing on the industry’s economic performance.”

Competitors Exxon, Chevron (CVX.N) and Shell (SHEL.L) also saw their refining revenues fall. Chevron reported a loss in its refining business for the first time since 2020.

Chevron Corporation (NYSE: CVX) said it “reported earnings of $3.2 billion, or $1.84 per share, on a quarterly basis.” Q4 2024 data. Q4 2023 was $2.3 billion ($1.22 per share).” The quarter included severance costs of $715 million and impairment charges of $400 million. Currency added $722 million to earnings. However, adjusted earnings in Q4 2024 were $3.6 billion ($2.06 per share), down significantly from adjusted earnings of $6.5 billion ($3.45 per share) in Q4 2023.

 

Oil flows by ship, profits fall
The maritime oil trade is unlikely to decline this year or next. Russian oil has been leaking between sanctions on ships of the shadow fleet. That is why the big oil companies do not expect a quick improvement in refinery profits in 2025. Although oil trade has remained at a good level, executives of the big oil companies noted this week that it will be difficult to achieve an improvement in refinery profits in the short term.

Chevron, Exxon Mobil and Shell have already calculated their economic results for the fourth quarter of last year. Profits have been hit hard by falling fuel production margins. The increase in global refining capacity in 2024, combined with falling demand, has had a negative impact on refining margins.

Leading American oil company Exxon Mobil Corporation announced that “earnings in the fourth quarter of 2024 were $7.6 billion, or $1.72 per share.” Cash flow from operations was $12.2 billion, and free cash flow was $8 billion. Capital and exploration spending and cash capital expenditures were $7.5 billion in the fourth quarter of last year. For the full year 2024, the company reported earnings of $33.7 billion, or $7.84 per share.

In comparison, Saudi Aramco’s net income in Q3 2024 alone reached $27.6 billion. However, it was significantly lower than a year earlier, when it reached $32.6 billion (Q3 2023). Cash flow from operations increased significantly, reaching $35.2 billion (Q3 2023: $31.4 billion). The debt ratio changed visibly, to 1.9% as of September 30, 2024, compared to -6.3% at the end of 2023. As a result, the underlying dividend for Q3 2024 was at $20.3 billion.

“Aramco delivered solid net income and generated strong free cash flow in the third quarter, despite the lower oil price environment. We also expanded our upstream operations, strengthened our downstream value chain and expanded our new energy program, continuing to invest in cycles,” said Amin H. Nasser, Aramco’s chairman and CEO.

Saudi Aramco maintained its strong growth momentum, which translated into capital expenditures, which amounted to $13.2 billion in Q3 2018 alone. A broad renewable energy program is also underway, including financing for a group of three photovoltaic projects with an expected combined capacity of 5.5 GW.

Trump’s tariff games
Trump’s tariffs on crude oil, gas and oil products could trigger corresponding market and operational reactions from European and Asian refineries. Analysts and market participants told Reuters that U.S. President Donald Trump’s trade tariffs on Canadian and Mexican crude oil imports will give European and Asian refineries a competitive advantage over their American rivals.

Oil trade from Russia to China and India has reached an impasse in early 2025. Sanctions are driving up transportation costs, as delivery routes have to be adjusted, destination ports have to be changed, and transshipments have to be made between ships. Traders’ announcements suggest that Russian oil trade for delivery in March to the main Asian buyer has reached an impasse. In China, large price differences have been announced between buyers and sellers. This is the result of a noticeable increase in the costs of chartering tankers not covered by U.S. sanctions.

The oil market situation changed when Washington imposed new sanctions on January 10, 2024. As a result of these actions, the supply chain of crude oil to Russia to ports in China and India was disrupted. As some buyers and liquid cargo terminals in China and India avoided sanctioned ships, there was a sharp increase in freight rates for the transportation of oil.

OPEC+ price pressure
Oil and gas prices and freight in 2024 were affected by the fact that oil production in Russia fell by 2.8%, gas production increased by 7.6% in 2024. Production of crude oil and gas condensate in Russia reached 516 million tons, which is the result of 10.32 million barrels per day pumped from wells.

Russia has reduced oil production after an agreement with the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+. As a result, American oil companies are facing price pressure. The largest American companies operating in the oil industry services market are facing lower prices and revenues in 2024.

This is visible in the results of the fourth quarter of last year announced in January and February of this year. Shale oil producers are becoming more efficient and reducing operating expenses. They are responsible for new oil supplies, contributing to lower activity of drilling platforms.

EIA revises forecast
Despite concerns from U.S. producers, the Energy Information Administration (EIA) said U.S. crude oil production could reach another record this year. The EIA is revising its previous estimates and announcing new forecasts in its latest Short-Term Energy Outlook.

Demand growth estimates have not changed substantially. The EIA says it “now expects U.S. crude oil production to average 13.59 million barrels per day (bpd) in 2025, compared with its previous estimate of 13.55 million bpd.” The agency maintained its estimate for U.S. crude oil and liquid fuel consumption at 20.5 million bpd in 2025.

If U.S. oil companies follow Donald Trump’s advice and maximize U.S. crude oil production, it will have a significant impact on prices. According to the EIA, in this scenario, Brent prices are expected to average around $74 in 2025, before falling to around $66 in 2026. The disruptions in the market could trigger OPEC+ production cuts. They would reduce global oil inventories and keep oil prices at current levels until the first quarter of 2025.

Global liquid fuel production is set to rise by 1.7 million barrels per day in 2025, with around 100,000 barrels per day coming from OPEC+ producers. The group will increase production by 600,000 barrels per day in 2026. OPEC+ members will phase out voluntary production cuts in the future. Supplies will remain below their targets in order to limit the growth of global oil inventories, the EIA said.

According to the EIA, “outside OPEC+ production growth will be driven by the United States, Canada, Brazil, and Guyana through 2026. Global liquid fuel consumption will increase by 1.4 million barrels per day in 2025 and 1 million barrels per day in 2026, led by India and China.” The projected growth is still slower than the pre-pandemic trend.

The EIA said any future tariffs imposed by Trump on Canada and Mexico should not significantly affect global oil supplies at this time. Uncertainty about future oil prices has been fueled by new U.S. sanctions on trade in Russian crude. The EIA said in its latest forecast that U.S. refinery utilization will remain relatively high. However, net U.S. fuel exports will decline as domestic fuel demand is met by the closure of two U.S. refineries. However, oil will travel thousands of nautical miles to EU countries, China, and India.