Oil Daily | OPEC Warns Against Underinvestment Amid Rising Demand; U.S. Shale Output Predicted to Decline

【Global Oil Supply and Demand】

Crude oil demand is set to rise by 24% cumulatively until 2050, driven by population growth, according to OPEC's secretary-general. He warns against underinvestment in oil and gas supply, estimating global investment needs at $17.4 trillion over 25 years, contrasting with the $110 trillion needed for a net-zero economy. OPEC projects oil demand will grow by 1.3 million barrels per day in 2025 and 2026, while the IEA predicts slower growth.

Peak shale production may have passed, with U.S. output forecast to drop from 13.5 million barrels per day in Q2 2025 to 13.3 million by 2026, according to the EIA. A decline in active drilling rigs and weak oil prices signal a plateau in production growth, as operators prioritize shareholder returns over expansion.

【Oil-Producing Countries Dynamics】

Russian President Vladimir Putin has extended the ban on the sale of Russian oil to buyers complying with the Western price cap, effective until 2025. The decree prohibits exports under contracts with the $60 per barrel ceiling, challenging Western efforts to limit Russia's wartime revenues while keeping its oil in global markets.

China's natural gas demand growth is slowing, prompting domestic producers to lobby for more gas-fired power plants as a key growth driver. They propose installing 70 gigawatts of new capacity by the decade's end, despite high costs compared to solar and coal power.

Japan's Taiyo Oil has purchased Russian Sakhalin crude to ensure LNG supply, following government instructions. Japan stopped importing Russian crude in early 2023 but has a U.S. waiver to import from the Sakhalin-2 project, despite dealing with a blacklisted tanker.

Nigeria's negotiations with Aramco for a $5-billion oil-backed loan are challenging due to falling oil prices. Nigeria may need to back the loan with more oil production, exacerbated by struggles to meet its OPEC quota amid oil theft and vandalism.

【Latest Oil Policies】

Texas' Railroad Commission introduces new guidelines for saltwater disposal well permits, raising costs for operators. The guidelines aim to confine injected fluids to disposal formations, impacting smaller producers in the Permian, where water-to-oil ratios are high, posing challenges to production growth amid lower oil prices.

【Industry News】

Germany-based Proxima Fusion has secured $150 million in Series A financing, the largest private fusion investment in Europe. Founded in 2023, Proxima aims to build the world's first commercial fusion power plant using stellarator technology, a complex design expected to produce stable plasma suited for power generation.

【Company News】

General Motors invests $4 billion in manufacturing capacity for internal combustion engine vehicles, responding to strong demand for SUVs and trucks. This move, contrasting its plan to sell only EVs by 2035, reflects cooling interest in electric cars amid EV losses despite rising sales and incentives.

【Others】

The U.S. and China reached a framework to ease trade restrictions, yet oil prices fell as traders remained cautious. The EU discussed a ban on Nord Stream pipeline and lower Russian crude price cap. The World Bank forecasts global growth to slow to 2.3%, the weakest since 2008.

U.S. crude oil inventories fell by 370,000 barrels, below analyst expectations for a build. Gasoline inventories rose, but remain below the five-year average, while distillate inventories increased sharply. Cushing inventories also decreased, highlighting ongoing shifts in inventory levels.