Middle East Geopolitics & OPEC’s Production Delay Boost Oil Prices: What Lies Ahead for Long-Term Trends?

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Global crude oil prices have been volatile since the third quarter of this year. Recently, uncertainties surrounding Middle Eastern geopolitics, spurred by the collapse of the Syrian government, alongside OPEC+’s decision to postpone its January 2025 production increase to April, have collectively driven WTI and Brent crude oil prices up by approximately 2.3% within a few days to $68.6 and $72.4 per barrel, respectively. However, these factors appear to offer only short-term support for oil prices, with their long-term trajectory remaining unclear for the following reasons:

 

Weak Demand in China

Despite the Chinese government launching a series of easing policies in September, recent inflation data indicates that domestic consumer demand remains weak. Moreover, a recent report by the EIA highlights that the increasing adoption of electric vehicles and liquefied natural gas trucks in China is expected to further reduce the country’s demand for crude oil.

 

Trump’s Energy Policies

With Donald Trump re-elected as U.S. President and appointing Lee Zeldin as head of the Environmental Protection Agency, U.S. energy policy is expected to shift further toward traditional energy sources. Currently, U.S. crude oil production is at a historical high, and the EIA’s December report projects that even if refinery output decreases in the future, crude oil production is likely to continue growing.

 

OPEC Resuming Production Increases

Although OPEC announced on December 5 a delay in its planned January 2025 production increase to April, the EIA estimates that while this reduction could lower global crude oil inventories by approximately 700,000 barrels per day in the first quarter of 2025, subsequent production increases by OPEC and continued production growth by non-OPEC countries may lead to a daily global inventory increase of about 100,000 barrels.

 

While crude oil prices have seen short-term support from Middle Eastern political instability and delayed production plans, longer-term dynamics remain uncertain. Factors such as weak demand in China, anticipated production increases by OPEC, and ongoing supply growth from non-OPEC countries are likely to maintain pressure on oil prices.

The EIA projects that Brent crude oil prices will gradually decline from $74 per barrel in the first quarter of 2025 to $72 per barrel by the fourth quarter.