The global crude oil export market is set to experience its first contraction since the onset of the COVID-19 pandemic in 2024, with a projected decline of 2%. This downturn primarily stems from a combination of lackluster demand growth and shifts in refinery operations and pipeline infrastructures, which have prompted significant changes in trading routes.

Geopolitical tensions have further exacerbated the chaos in global oil transportation, resulting in altered tanker routes and the fracturing of suppliers and buyers into various regional alliancesNotably, Middle Eastern oil exports to Europe have plummeted by 22%, while a surge in exports from the United States and South America is heading towards EuropeConcurrently, Russian oil is increasingly redirected to markets in India and ChinaThis transformation is accentuated by heightened attacks on shipping in the Red Sea and closures of European refineries.

This stark decline in Middle Eastern oil exports to Europe underscores a fundamental shift in global oil trade flows

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Such shifts are not merely reshaping supply chains; they also create new opportunistic alliancesImportantly, oil transportation no longer adheres strictly to the lowest-cost pathway, inciting shipping tensions, escalated freight rates, and ultimately affecting refinery profitability.

The burgeoning shale oil industry in the United States stands out as a significant beneficiary of these market changesThe U.Shas seen its oil exports soar, elevating its share of the global market to 9.5%, a figure exceeded only by Saudi Arabia and Russia in the hierarchy of oil-exporting nations.

In addition, the recent launch of Nigeria's Dangote refinery, the expansion of Canada’s Trans Mountain pipeline, a decline in Mexican oil output, temporary disruptions in Libyan exports, and an increase in production from Guyana have collectively further complicated global oil trading routes.

As we look toward 2025, suppliers will face the impending challenge of declining fuel demand from major consumption centers such as China, alongside a broader global shift towards natural gas and renewable energy, which will only heighten market uncertainty.

Eric Brouckheysen, an offshore research and consulting manager at Poten & Partners, highlights that such uncertainty and volatility have now become the new norm, declaring 2019 as the last year perceived as 'normal.' As demand forecasts undergo dramatic revisions, long-held assumptions regarding market growth are being overturned, with a marked decrease in demand from both China and Europe.

Last year, the adoption of electric and plug-in hybrid vehicles in China contributed to a roughly 3% drop in the country’s crude oil imports

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In Europe, refinery capacity declines coupled with government measures to reduce carbon emissions led to a decrease in crude oil imports by approximately 1%.

On the supply side, the emergence of new suppliers and transportation routes has reshaped the market dynamicsEuropean refiners are increasingly turning to U.Sand Middle Eastern oil, and as shipping costs in the Red Sea rise, they are compelled to ramp up imports from the U.Sand Guyana.

In 2024, exports from Iraq have dropped by 82,000 barrels per day, while the United Arab Emirates has reduced its exports by 35,000 barrels per dayIn stark contrast, Europe has seen an increase of 162,000 barrels per day in imports from Guyana and an additional 60,000 barrels per day from the U.SBy the end of September, escalated Middle Eastern conflicts and fears of U.Ssanctions have tightened Iranian oil supplies, leading to rising prices.

Moreover, Nigeria's newly established Dangote refinery has driven an increase in the country’s crude oil exports while simultaneously reducing its exports to Europe, even resulting in an unusual situation where Nigeria has begun to import crude oil from the U.S.

According to Kpler data, the Dangote refinery consumes a significant portion of Nigeria's domestic supply, resulting in the country's crude oil export figures sitting at about 13% in 2024, a stark increase from just 2% in 2023. This shift has seen a decrease in Nigeria's exports to Europe, while the country also now imports 47,000 barrels of WTI crude oil daily from the U.S., a rarity for a major net exporter.

Furthermore, refining capacities under development in Bahrain, Oman, Iraq, and Mexico's Dos Bocas region may absorb further oil production from these locales

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In Canada, the expanded Trans Mountain pipeline is now capable of delivering an additional 590,000 barrels per day of crude oil to the Pacific coast, positioning the country’s waterborne exports to potentially reach a record high of 550,000 barrels per day by 2024.

This creates a chain reaction: as increasing amounts of Canadian crude head toward the U.SWest Coast, refineries in the area are reducing purchases of Saudi and Latin American crude, while Canadian shipments to Asia are diminishing due to a decrease in transshipment through the U.SGulf Coast.

Analysts have noted that while China remains the primary buyer of Canadian crude, emerging importers such as India, Japan, South Korea, and Brunei are also entering the market, with anticipation of more Asian refiners likely to procure Canadian oilThe situation is further complicated by a proposed 25% tariff on oil imports from Canada and Mexico, which could significantly affect oil flow patterns by 2025.

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