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Informist, Monday, Jun. 30, 2025

MUMBAI – S&P Global Commodity Insights has reduced its outlook for growth in global oil demand to 800,000 barrels per day in 2025 from 1.2 million barrels per day projected earlier, due to a potential slowdown in the global economy, said Premasish Das, executive director for oil markets research and analysis Insights said at a media briefing on Monday. Das also flagged the possibility of demand growth in the second half of year either staying unchanged or even lower from the year-ago period. 

The global oil market is facing a heightened volatility due to a combination of geopolitical tensions, trade policy shifts, and supply-side dynamics. The sweeping tariffs imposed by US President Donald Trump's administration on all trading partners have introduced significant economic uncertainty, potentially reducing global GDP growth to 2.2% in 2025 from 2.8% in 2024.

S&P Global now expects Brent crude oil price to average $68 per barrel for 2025, up from $63 per barrel projected earlier. However, they see prices falling below $60 per barrel by year-end due to strong supply growth. Despite a ceasefire in the Israel-Iran conflict, lingering tensions could still lead to different outcomes which could influence market dynamics, he said.

Demand for oil from China and the US is expected to be the most affected, particularly for refined products such as diesel and jet fuel. Meanwhile, the three consecutive increases in production from the Organization of the Petroleum Exporting Countries and its allies, which were driven by frustration among compliant producers within the group, may be offset if overproducers such as Iraq, Russia, and Kazakhstan reduce their output, Das said.

In the long term, global oil demand is forecast to decline due to alternative energy adoption and efficient gains, though prices may remain firm to support new discoveries, Das said. India is set to lead global oil demand growth, however, increasing its import dependence and reinforcing the need for a diversified crude sourcing strategy, he added.

In terms of trade and shipping, Rahul Kapoor, vice president and global head of shipping research at S&P Global Commodity Insights, said, "Traditional supply chain models need to be reimagined to incorporate geopolitical risks, tariff regimes, and sanctions." He emphasised that global trade growth has plateaued, shifting focus to emerging economies. "India stands at a critical inflection point, with immense potential to capture a greater share of global trade," he said. While tanker traffic remains stable, India has reduced its exposure to the Strait of Hormuz to 41% in 2024 from around 55% in 2019–2022 due to an increase in imports of crude from Russia.

Analysts also expect India's energy sector to continue to grow looking ahead. According to Eduard Sala de Vedruna, head of research, energy transition, sustainability and services, S&P Global Commodity Insights, India's energy sector is undergoing significant transformation, driven by the need to meet growing demand and reduce carbon emissions. 

The government has set an ambitious target for renewable energy capacity, aiming to achieve 175 gigawatts by 2022 and 450 gigawatts by 2030. With the 2022 target not being met, the government has revised its target for 2030, aiming to achieve a renewable energy capacity of 500 gigawatts (including hydro), the head of research said.

"We believe this is achievable, but in our base case forecasts, the target date may shift to 2032 instead of 2030. Currently, the total installed renewable capacity has surpassed the 200 GW (gigawatts) mark. These efforts are part of a broader strategy to enhance energy security, reduce dependence on imported fuels, and mitigate environmental impacts," Vedruna said. However, India's energy sector is likely to face several challenges like infrastructure constraints, financial health of distribution companies, and regulatory hurdles, he said. 

Jenny Yang, global head of power and renewables research, S&P Global Commodity Insights, said global power demand is anticipated to increase more than 80% in the next 25 years, driven by economic growth, electrification, and emerging demand from new sectors like data centres. "Renewables and battery are poised to dominate capacity additions, accounting for an impressive 96% of net additions between now and 2050, thanks to their cost competitiveness across multiple markets."

In India, contribution of non-fossil fuel sources for power generation was 47% of capacity and 24% of generation in 2024. "By 2050, these figures are projected to rise to 77% and 66%, respectively," Yang said. "Despite the massive build-out in renewables, conventional thermal power will still make up 16% of global capacity additions to 2050 to support system reliability."  End

US$1 = INR 85.75

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Ashutosh Pati, J. Navya Sruthi, and Abhijit Doshi

Edited by Akul Nishant Akhoury

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