World oil exports fall: How new routes are changing global trade

By Asif Aydinly

The global export of crude oil declined by 2% in 2024—the first drop since the COVID-19 pandemic—marking significant shifts in the global oil industry. Reuters, citing shipment data, notes that this decrease stems from weak demand growth, changes in refinery operations, pipeline disruptions, and the redistribution of global trade routes. These factors have exacerbated an already volatile global oil market. Geopolitical tensions remain a major factor influencing the market. The Russia-Ukraine war and escalating conflict in the Middle East have disrupted traditional supply chains. Sanctions and restrictive measures have redirected Russian exports from Europe to India and China.

Simultaneously, Middle Eastern oil exports to Europe fell by 22%, forcing European countries to seek alternative suppliers. As a result, Europe has increased imports from the U.S. and South America, offsetting reductions from the Middle East. Refinery closures in Europe, driven by Red Sea shipping disruptions, have worsened the crisis. The United States has strengthened its position in global oil trade through rising shale oil production. In 2024, the U.S. exported around 4 million barrels per day, accounting for 9.5% of the global market. This rise has allowed the U.S. to surpass many traditional suppliers, including Middle Eastern countries, as a key exporter. This success is attributed to increased production and infrastructure developments such as the expansion of Canada’s Trans Mountain pipeline, which added 590,000 barrels per day to export capacity, boosting shipments to Asian markets. Demand for oil in major consumption centers is declining, further reshaping global trade flows. China, for instance, reduced oil imports by 3% in 2024 due to the rise of electric vehicles, plug-in hybrids, and greater use of liquefied natural gas (LNG) in freight transportation.

In Europe, refining capacity has fallen by 1%, influenced by environmental restrictions and government measures to reduce carbon emissions. These trends reflect a broader shift toward reducing oil dependence and adopting cleaner energy sources. The restructuring of trade routes also plays a significant role. The launch of the Dangote refinery in Nigeria has enabled substantial domestic processing, reducing the country’s exports by 13%. However, Nigeria has started importing oil from the U.S., a surprising move for a major exporter. Canada has increased its exports to Asian markets, including China, India, and Japan, following infrastructure improvements. Meanwhile, Europe has reached record levels of imports from the U.S. and Guyana, offsetting reductions in supplies from the Middle East and Russia.

The formation of new trade alliances is an inevitable outcome of these changes. Russia is strengthening ties with China, India, and Iran, creating partnerships that are altering the structure of global oil trade. These alliances provide more flexible market access and help mitigate losses from Western sanctions. However, the redistribution of oil flows has also led to higher transportation costs due to increased freight expenses, reducing refining profitability. Geopolitical conflicts remain critical catalysts for change. The escalation of tensions in Gaza in 2024 led to attacks on Red Sea shipping, driving up oil transportation costs. Amid these events, European refineries have increased oil purchases from the U.S. and South America.



While these measures help European countries adapt to new conditions, they also raise costs. Weak demand and environmental initiatives are undermining traditional growth forecasts for the oil market. Before 2020, analysts believed that long-term oil consumption growth was inevitable, compensating for short-term crises. However, recent years have shown that this confidence is no longer justified. Declining demand in China, the rapid development of renewable energy, and the implementation of environmental regulations are reshaping expectations. In 2024, many countries increased their reliance on natural gas and renewable energy, reducing dependence on oil.

These changes signal that the oil market has entered a new era. The previous stability has given way to ongoing volatility, where political decisions and conflicts play a central role. Countries and companies are being forced to adapt. For example, the U.S. and Canada are actively expanding export capacities, while Middle Eastern nations face heightened competition and the need to diversify markets. The outlook for 2025 remains uncertain. Proposed sanctions by U.S. President Donald Trump, including a 25% tariff on oil imports from Canada and Mexico, could further redistribute trade flows.

Additionally, declining oil demand in major economies like China and Europe will accelerate the transition to alternative energy sources. Amid these changes, leading players must devise new strategies to maintain their positions. The global oil industry will not return to the "normalcy" of 2019. Volatility, geopolitical risks, and changing consumer preferences are shaping a new reality where success depends on the ability to adapt quickly.

News.Az