Rystad Energy’s market trends to watch in 2025 in upstream, shale and LNG

After an eventful year in the world of energy last year, 2025 looks set to bring changes across the energy policy landscape amid the push for decarbonisation and the increasing influence of artificial intelligence (AI), according to Rystad Energy. Elections in almost all major global economies in 2024 have set the stage for a shifting policy landscape this year, most notably in the US where President-elect Donald Trump will outline his priorities and plans for the incoming administration later this month.

“We’re moving from a time of energy scarcity to a time of energy abundance,” said Rystad Energy CEO and founder Jarand Rystad. “Capacity additions in both fossil fuels and renewables will outpace increases in demand next year. Similarly, in the face of an oversupplied oil market, OPEC+ may need to extend its production cuts far into 2025 to protect oil prices. The era of China driving oil consumption growth is over, with the country’s peak diesel in the rearview mirror, gasoline demand plateauing and coal consumption leveling off, as it is globally. This is echoed in the electricity market, with 90% of the power consumption growth in 2025 coming from renewables, while nuclear and gas share the remaining 10%. The intermittency of renewable power capacity has triggered record periods of negative prices, intensifying the need for reliable energy storage. As such, 2025 could be a breakout year for energy storage systems.” 

In the first part of this 2025 forecast series, here are some significant trends identified by Rystad Energy experts that will shape the energy world in the coming year:

Geopolitical uncertainty will persist in 2025

Shaped by both economic challenges and geopolitical turbulence, 2025 is set to be a year of heightened uncertainty. The US-China dynamic, under a new US administration, will take the spotlight. At the same time, ongoing conflicts in the Middle East and the war in Ukraine will command attention on the global stage. Rising instability across the Global South, the continued fracturing of international alliances and the transformative impact of AI will further redefine the global order.

Economically, the threat of a global trade war sparked by US tariffs looms large, potentially stalling growth and fueling protectionist policies. A key question is how quickly advanced nations can rein in inflation, especially as trade barriers complicate the efforts of central banks. Meanwhile, governments are expected to pivot toward addressing mounting deficits. Adding to these challenges, China’s economic slowdown – driven by a struggling real estate sector and subdued consumer confidence – risks creating significant ripple effects worldwide. (By Jorge Leon, Head of Geopolitical Analysis, Rystad Energy)

Upstream sector poised for a more quiet year

Global upstream investments are projected to decline by 2% next year, signaling a plateau after the robust growth seen earlier this decade. Deepwater investments are expected to increase by 3%, driven by developments in Suriname, Mexico and Türkiye. Offshore shelf investments are predicted to grow by 2%, fueled by activity in Indonesia, Qatar, and Russia. Rystad Energy forecasts a decline of around 8% in shale/tight oil investments in 2025, due to a combination of lower activity and reduced unit prices.

Global liquids demand is estimated to grow by about 1 million bpd, and the faster pace of non-OPEC+ supply growth is leading to an oversupplied market, putting downward pressure on oil prices. Non-OPEC+ oil supply is expected to increase by approximately 1.4 million bpd, with both tight oil and deepwater contributing to this growth. NGL and other liquids are also projected to grow next year, adding more than 300,000 bpd. Leading into 2025, the OPEC+ balancing act will make or break oil prices, seeking to manage its market share expectations alongside non-OPEC+ growth and slowing demand. (By Aditya Saraswat, Senior Vice President, Upstream Research, Rystad Energy)

Refinery margins to remained squeezed by seasonal demand dips

Thin refinery margins are likely to persist, particularly during the seasonal demand lull in the first quarter. Margins in Asia may find some support later in the second quarter as refinery maintenance takes hold. However, the outlook for demand growth – especially in China – remains subdued, driven by the rising share of EVs and gains in fuel efficiency. This prolonged weak-margin environment has already contributed to refinery attritions in China, the US and Europe – a trend that is expected to continue through the new year. Delays in commissioning additional capacity are also increasingly likely. These factors could result in product tightness in the second half of 2025, potentially driving a degree of recovery on margins. (By Valerie Panopio, Senior Analyst, Commodities Markets – Oil, Rystad Energy)

US shale oil producers won’t be moved by “Drill, baby, drill”

President-elect Donald Trump has come out unambiguously in favour of encouraging more oil and gas production in the US. While executives may be encouraged by the supportive rhetoric, they are less likely than ever to boost budgets towards more drilling, especially as a potential oversupply of oil looms over the market and well productivity stagnates. Third-quarter 2024 reports, released around the election, show that management teams remain focused on shareholder returns and acquisition-driven inorganic growth rather than expanding through drilling activity. For now, 'Shale 4.0' investor priorities are expected to outweigh 'Trump 2.0' policy considerations in US producer boardrooms. Looking ahead, investors are unlikely to accept reduced near-term returns alongside declining capital efficiency, which a shift back to a high-production growth model would entail. (By Matthew Bernstein, Senior Analyst, Shale Research, Rystad Energy)

US LNG exports could become a key bargaining chip in global trade

Trump’s push for deregulation and energy dominance could accelerate US LNG exports by fast-tracking permitting and infrastructure expansions, reinforcing US oil and gas production as well as LNG export growth. The domestic and global LNG market is already feeling the effects of the Biden administration’s moratorium on new non-FTA LNG approvals, which has helped tighten global balances in the medium term. Trump has vowed to reverse the pause when he takes office, which would benefit developers with pending projects. However, accelerating these projects could worsen the global LNG supply glut in the medium term if markets face a ‘too much, too soon’ situation.

The potential for oversupply in global markets could destabilize prices, especially if trade tensions with China reignite, which would have negative consequences for US producers and LNG developers. US LNG projects rely on securing consistent demand from China. Additionally, Trump faces a delicate balance between boosting US LNG exports to Europe and managing his stance on Russia. With Europe’s growing LNG demand, Trump sees an opportunity to reduce Russian influence, but swiftly ending the Ukraine war, as he has repeatedly claimed, may require easing sanctions. Regardless, Trump’s energy agenda in 2025 is likely to reshape US and global energy markets, but careful balancing of market fundamentals and geopolitics will be crucial. (By Emily McClain, Vice President, North America Gas & LNG Markets, Rystad Energy)