Oil Market 2024 in Review: A Year of Surprises and Shifting Demand

It has been an eventful year for world energy: oil supply jump scares in the Middle East, a surge in electricity demand, and a nuclear renaissance were all among the hallmarks of 2024, along with a pickup in natural gas demand.

All of these trends appear set to continue into 2025, along with increasingly severe challenges on the path of the energy transition.

In oil, 2024 was an interesting year, with OPEC and the International Energy Agency vastly differing in their forecasts about demand for the commodity that underpins the global economy. Other analysts also disagreed, leaving traders stuck between actual fundamentals and predictions based on unproved assumptions, such as the adoption rate of electric cars, which has been weakening everywhere except in China.

Speaking of demand and China, the latter was the key driver of oil prices this year. Almost every report on oil price changes featured the phrase “concern about Chinese demand” in its lede—unless it featured the latest from the Middle East, the supply-side driver of oil prices for the year. Chinese demand growth this year apparently underwhelmed, disappointing traders who expected it to continue growing at double-digit percentage figures forever.

What’s more, several stimulus packages announced by the government in Beijing did not immediately lead to a surge in oil demand, which contributed to the oil price depression. Even the latest import figures, which suggested oil imports are picking up after several weak months, did not change market sentiment, as the full-year average rate of import is set to be lower than the average for 2023.

While traders watched China for red flags in demand, the war between Israel and Hamas expanded to the point where Israel and Iran exchanged direct strikes, temporarily reigniting fears of an oil supply disruption. However, both decided not to push it eventually, and those fears dissipated, to be replaced once again by “concern about Chinese demand,” even as some analysts warned that oil demand is being mispriced due to the work of trading algorithms and that a correction was looking over the oil market.

While traders worried about demand in China, the oil industry in the United States was busy consolidating. The merger and acquisition spree that began last year continued this year, with several billion-dollar deals in the shale patch, leading Enverus to suggest that 2024 could surpass 2023 in terms of total deal value. In the third quarter of the year, however, the pace of M&A dealmaking slowed down as buyers basically started running out of targets.

Speaking of the shale patch, it was a key talking point for oil price forecasters this year, as usual, but with a twist. Following Donald Trump’s landslide victory in the November elections, a lot of oil market forecasters expected the U.S. oil industry to double down on production growth. It did not take long for the industry itself to dispel the illusion. None other than Exxon’s CEO said there would be no “Drill, baby, drill” unless international oil prices justified such a strategy.

Exxon, along with Chevron, meanwhile, ventured into a new business segment: power generation. Another defining trend of 2024 is that demand for natural gas is soaring as the demand for electricity soars on the proliferation of data centers as Big Tech pursues its artificial intelligence ambitions. Indeed, earlier in the year, the surge in demand for electricity caught power utilities unaware—and that surge will intensify in the coming years. This is where natural gas suppliers come in, and this is why the prospects for natural gas for the medium term are a lot brighter than those for crude oil. This is also why there is talk about a nuclear renaissance.

Wind and solar, the twin pillars of the energy transition, have not been doing very well lately. New additions are slowing down because developers are struggling to absorb higher costs and lower subsidies, and they are also struggling with increasingly frequent negative electricity prices resulting from overproduction during periods of strong sunshine or wind.

Some governments, like the one in the UK, are stepping up their transition efforts with higher subsidies that will be passed on to consumers—a risky move for people who came into power promising to lower bills. Others are staying put because the subsidy money is running out. Yet ambitions for low-carbon electricity are very much alive, which is where nuclear comes in.

Offering the best of both worlds, namely baseload electricity and no emissions, nuclear is drawing well deserved attention. There is, however, a problem with it, and that problem is that it takes years to build a conventional nuclear power plant. This is why small modular nuclear reactors made headlines this year as a faster alternative to those conventional plants, and they will probably continue making headlines until they are proven a viable alternative of the large facilities. For now, however, it’s conventional nuclear on the table and plans are already being drawn for gigawatts of new capacity.