December 04, 2025 [Wood Mackenzie]- 2025 delivered a series of short-lived disruptions that affected global oil and refined product markets, even as crude benchmarks remainedrelatively stable. Price impacts were temporary, but the underlying shifts carry longer-term significance. The following five developments were the most consequential.
Tensions surrounding Chinese ownership and involvement in Panama Canal–adjacent infrastructure increased in early 2025. Chinese firmsoperateport facilities on both sides of the canal, and China accounts for about 21 percent of canal traffic compared withroughly 40 percentfor the United States.
Concerns escalated around a Belt and Road Initiative bridge project, the PuentesobreelCanal de Panama IV, which integrates directly with port areas. The United States argued that the project could create operational leverage for China over commercial and military transits.
The conflict introduced intermittent delays and higher freight rates. While disruptions werecontained, the geopolitical risk premium remained elevated throughout the year.
Several countries achieved record output in 2025, reinforcing the shift toward more diverse global supply sources:
Other producers approached historical highs, including Argentina, the United Arab Emirates, and Iran.
Theadditionalsupply, arriving during a period of slowing demand growth, contributed materially to the Q4 2025 surplus. This placed further pressure on legacy exporters such as Saudi Arabia and Russia, both of which continued to manage output to stabilise balances.
Structural changes in refining capacity were concentrated in the United Kingdom and the Pacific Basin.
In the UK, the closures of Grangemouth in April and Lindsey in August shifted the domestic product balance. Surviving refineriesbenefitedfrom stronger cracks, but the UK now relies more heavily on imported products and is increasingly exposed to global spot price volatility.
Across the Pacific, simultaneous planned and unplanned outages in Japan, China, and California resulted in sharp increases in petrol prices during June and July.
On the U.S. West Coast, the December shutdown of Valero Benicia and the scheduled Q1 2026 shutdown of Phillips 66 Wilmington will further tighten the regional product market. Three pipeline proposalsemergedto offset the lost capacity, though all face commercial and regulatory hurdles.
Industry consensus on the timing of peakoil demandshifted significantly in 2025. Earlier expectations centred on 2028, then moved to 2030 andsubsequently2034. Forecasts published this year increasingly point to continued, though modest, demand growth through at least 2050.
The shift supports renewed interest in long-cycle investment. Multiple multibillion-pound infrastructure proposals advanced, many with operational timelines beginning in the early 2030s. Trading activityalso broadened, with new market participants adding exposure across crude and refined products.
Trade policy volatility was the dominant market risk of 2025. Tariffs were introduced, modified, reversed, and reinstated with limited notice. Each action led to abrupt price responses.
Market participants adjusted by reducing position sizes and adopting shorter time horizons. In several cases, traders were unable to unwind positions during rapid policy swings, resulting in significant losses and, in some instances, fund closures. Tariff-related headline risk became a central constraint on trading behaviour.
Additional events influenced regional markets:
