The global landscape of oil trade is undergoing a significant transformation, characterized by increasing uncertainty and volatilityThe year 2019 stands out as the last “normal” year before an array of geopolitical tensions and market disruptions precipitated a fundamental reconfiguration of how oil flows across the globe.

As we delve into the statistics of 2024, we observe a striking 2% decrease in global crude oil exports, marking the first such decline since the onset of the COVID-19 pandemicSeveral factors converge to explain this downturn, notably sluggish growth in global demand alongside shifts in refining and pipeline operations, which necessitate the reevaluation of trade routes.

The flows of oil tankers have been redirected, leading to a segmentation of suppliers and buyers into distinct geographical regionsThe Middle East's oil exports to Europe have notably waned, while oil from the United States and South America has surged toward European markets

One of the more conspicuous shifts includes the redirection of Russian oil, traditionally destined for Europe, now finding its way to emerging markets in India and China.

This evolving scenario has been exacerbated by a series of attacks on shipping routes in the Red Sea and the simultaneous closure of several European refineriesData from Kpler highlights that in 2024, the Middle East's crude oil exports to Europe plunged by a staggering 22%. These rapid developments underscore a drastic reorientation of global energy trade.

Energy consultant and former oil trader Adi Imsirovic notes that "the changes in oil flows are creating opportunistic alliances," suggesting a tightening of relationships between Russia and nations such as India, China, and Iran, thereby reshaping the landscape of oil commerce.

Interestingly, the oil market is no longer flowing along the traditional lines of cost efficiency

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The first consequence of this paradigm shift has been a tightening in shipping availability, leading to increased freight costs, which, in turn, erodes refining margins.

The consequence of the 2% global decline in crude oil exports in 2024, the first contraction observed since 2021, owes much to America's escalating shale oil productionThe United States has emerged as a dominant player in the global oil market, exporting 4 million barrels of oil daily, thus elevating its share of the global oil trade to 9.5% – a position only second to Saudi Arabia and Russia.

Trade routes are evolving as well, influenced by developments such as the commissioning of Nigeria’s Dangote refinery, the expansion of Canada’s Trans Mountain Pipeline to the West Coast, decreases in oil output from Mexico, sporadic halts in Libyan oil exports, and increased production from Guyana.

By 2025, suppliers will likely continue grappling with diminishing demand from major consumption centers like China

Additionally, a shift towards reduced oil usage, substituted by natural gas and an accelerating reliance on renewable energy sources, is anticipated.

According to Erik Broekhuizen, maritime research and consulting manager at ship brokerage firm Poten & Partners, “This uncertainty and volatility is the new normal – 2019 was the last year of ‘normalcy’.”

Broekhuizen elaborates that fluctuations in oil demand forecasts now undermine long-standing assumptions about growth trajectories in the oil marketPreviously, there was a strong belief that healthy long-term demand growth would alleviate many issues over time—this assumption no longer holds true.

For instance, it is noted that China’s oil imports dropped by approximately 3% last year, largely due to the rise in electric and plug-in hybrid vehicles as well as an increased reliance on liquefied natural gas (LNG) for heavy-duty trucking

In Europe, the combined effect of declining refining capacities and governmental emissions reduction targets contributed to a 1% reduction in crude oil imports.

As European refiners scale back their intake of Russian oil, opting instead for supplies from the U.Sand the Middle East, the geopolitical crises, such as the ongoing conflict in Gaza, have led to escalating shipping costs associated with Middle Eastern oil transportation.

Throughout 2024, Iraq's exports declined by 82,000 barrels per day, and the United Arab Emirates saw a reduction of 35,000 barrels per dayConversely, Europe increased its intake from Guyana by 162,000 barrels per day and elevated imports from the U.Sby 60,000 barrels per day.

The tightening of Iranian oil supplies has also sparked a rise in prices, encouraging Chinese refiners to contemplate sourcing oil from West Africa and Brazil.

Remarkably, Kpler data indicates Nigeria's new Dangote refinery is consuming a considerable portion of domestic supply

By 2024, around 13% of Nigeria's crude oil output remained within the country—an increase from just 2% in 2023. This rise curtailed Nigeria's exports to Europe, leading to an unprecedented import of 47,000 barrels per day of American WTI crude, a notable contradiction for a major net exporter.

The new refining capacities in Bahrain, Oman, Iraq, and Mexico's Dos Bocas project could also play significant roles in accommodating the regional production of oil.

In Canada, the recently expanded Trans Mountain Pipeline is capable of delivering an additional 590,000 barrels per day to the Pacific Coast, which is expected to catapult the country's waterborne oil exports to a record 550,000 barrels per day in 2024.

This expansion has instigated a domino effect: as increased Canadian crude flows toward the U.SWest Coast, refineries in that region have simultaneously reduced their purchases of oil from Saudi Arabia and Latin America, while direct shipments from Canada to Asian nations have consequently decreased, diminishing the re-exportation of oil from the U.S