July was another month for the oil sector dominated, once again, by Donald Trump’s tariff war.
The US president’s tariff ultimatum on August 1 continued to fuel oil price volatility. This is after crude oil prices surged last week, driven by significant trade diplomacy breakthroughs, tightening supply signals, and mounting geopolitical risks.
Brent ended the week at $72.30 a barrel, with the alternative benchmark WTI at $68.80/b.
Standard Chartered forecasts that crude oil prices are likely headed higher over the long-term. Oil prices have remained close to $70/b in the post-pandemic period, and are roughly in-line with the 20-year average at $73.40/b. This is also the view of multiple analysts.
The oil market is hanging by a thread. Any adverse event could send prices soaring.
The physical oil market is becoming more challenging: inventories are draining, shale production is stagnating, new investment has been comatose for a decade, and global demand keeps breaking records.
The oil producers’ cartel, OPEC, was right to increase oil production this year. Non-OPEC output growth is fading. Global research giant Wood Mackenzie sees supply gains from Brazil, Canada and Guyana dropping by over 80% between now and 2027.
At its July meeting, OPEC+ agreed to add 548,000 bpd to its production. This is a bigger-than-expected output hike, accelerating its pivot toward market share over price defense.
Aramco CEO Amin Nasser said OPEC+ fields are depleting at a rate of 5.5% per year. Without replacement, this will lead to supply problems down the line.
The oil markets are calling Trump’s bluff on Russian secondary oil sanctions in an increasingly risky game. Oil traders are not buying it.
Russia produces nearly 10% of global oil, and is the third largest exporter. Secondary sanctions could lead to severe energy price shocks and inflation, something Trump is keen to avoid.
BP has offloaded its US onshore wind business as it pivots back to oil. It is pushing back towards fossil fuels in a bid to revive its share price.
Chevron plans to cut up to $3 bln in costs and reduce its workforce by 20% through a major worldwide reorganisation.
Oil suppliers see India as the next big driver of new global demand as growth slows in China, the world leader in demand growth so far this century.
World demand will average 105 mln bpd this year, OPEC said in its 2025 World Oil Outlook published in July. It will grow to average 106.3 mln bpd in 2026 and climb further to 111.6 mln bpd in 2029. Contrary to IEA predictions, there is no peak in sight.
Elsewhere, Turkey has canceled its 1973 Oil Pact with Iraq, signaling a deliberate effort to reshape the terms of northern oil exports on its own terms and restore Turkish leverage.
Gas demand growth to accelerate
The new IEA quarterly Gas Report states: “natural gas demand growth is forecast to accelerate in 2026, sending total demand to a new all-time high.”
A peak by 2030, as the International Energy Agency previously projected, seems highly unlikely. Yet again, IEA projections prove to be wishful thinking, not borne by reality.
Growth in global energy demand is outpacing growth in renewables. For quite some time, the world will need to grow all forms of reliable energy, including natural gas.
Wood Mac said natural gas is crucial for a low-carbon future. As energy demand grows around the world, gas and LNG will be critical in the shift to a lower-carbon future. Electrification can only move so fast, and hydrogen has a long way to go.
Final investment decisions (FIDs) on new LNG production capacity are likely to set a record in 2025. Close to 75+ MTPA (million tonnes per annum) is expected by year end. The signing of long-term contracts, particularly with end users, no longer seems to be an impediment to greenlight a project.
In the eastern Mediterranean, Cyprus and Egypt are progressing important agreements for development of the “Cronos” gas-field. The final investment decision is expected by the end of 2025, with first natural gas export in 2027.
Egypt plans more LNG deals, driving global competition, with a huge impact on its bleaguered balance of payments. It’s import bill for petroleum products and LNG is expected to be about $20 bln this year, up from $12.5 bln in 2024.
In 2019, Egypt became a gas exporter, earning $8 bln by 2022. But now, it’s back to importing. What a turnaround in three years. All due to short-sighted policies.
In Cyprus, ExxonMobil made a new, medium size, gas discovery at its Pegasus well in block 10.
Europe’s summer of disgrace
This is turning out to be Europe’s summer of humiliation. Europe cannot hide from the fact that the Trump administration has bullied it into submission on the US-EU trade tariffs agreement. The leading multilateral free trade block in the world has failed to stand up for trade.
Former Vice-President of the European Commission, Josep Borrell, said: “Bad strategy leads to bad outcomes. The Commission chose to appease and flatter Trump by agreeing to buy more weapons and gas — on which it has no competence — and by tolerating unilateral tariffs. Europe has emerged geopolitically weakened from a deal struck in just one hour on a golf course”.
There is a déjà vu here as the European Union risks overreliance on one gas supplier. The EU’s new plan to buy $250 bln of US energy for each of the next three years is unrealistic and could risk the bloc’s energy security. These are “pie in the sky” numbers.
Hitting its targets would require rerouting all US oil exports to Europe or a sixfold jump in Europe’s US LNG imports. As commodities analyst Kpler puts it, the vision “exceeds market realities”.
On top of that, the Trump-von der Leyen agreement is not legally binding because EU companies, not the Commission or EU entities, buy energy and they will not buy unless it makes commercial sense.
France’s budget bombshell is a wake-up call. It featured spending cuts, tax increases and even the scrapping of two public holidays, conveying the impossibility of carrying on with business as usual.
An increasingly impotent Europe is heading for bankruptcy unless it embraces major change: digitisation, decarbonisation and defense, all need to be financed, but cannot be afforded due to demographic decline.
US acting like a petrostate
Fed chairman Jerome Powell held rates steady, warning that “American businesses have been absorbing Trump’s tariffs so far, but eventually the burden will be shifted on to American consumers”.
The International Chamber of Commerce ruled in Chevron’s favour in its dispute with ExxonMobil over the acquisition of Hess and its Guyana oil assets. Chevron’s victory clears the way to close its $53 bln acquisition of Hess.
Chevron is preparing for a US oil supermajor battle with Exxon. But it has more work to do to rebuild its upstream business after years of cost cutting, if it wants to boost cash flows in the next decade and challenge Exxon.
After decades as the world’s largest oil importer, the US has emerged as the leading exporter of oil and gas. Since then, the country has begun to behave less like a liberal hegemon and more like a classic petrostate.
China’s mixed signals
China is building 74% of all the world’s current solar and wind projects, masking limited progress elsewhere.
China is shunning costly LNG imports. Hot summer weather is not expected to revive China’s weak LNG demand. It has access to cheap coal, more renewables and more gas by pipeline.
While most have been projecting a slowdown in China’s wind and solar deployment, the State Grid Energy Research Institute expects 380 GW solar and 140 GW wind power added to the grid this year.
Dr Charles Ellinas, Councilor, Atlantic Council
