Decline in Global Crude Exports as Trade Routes Experience Shifts

In 2024, global crude oil exports experienced a 2% decline, marking the first decrease since the COVID-19 pandemic, according to shipping data. This reduction is attributed to slower demand growth and significant changes in refinery operations and pipeline routes.

The global oil market has faced disruptions for two consecutive years, largely due to the ongoing conflicts in Ukraine and the Middle East. As a result, crude shipments have been redirected, with suppliers and buyers reorganizing along new trade routes. Notably, exports of Middle Eastern oil to Europe have diminished, while U.S. and South American oil exports to Europe have surged. Additionally, Russian oil that was once destined for Europe is now being redirected toward India and China. These shifts have been compounded by the closure of several refineries in Europe, exacerbated by persistent attacks on Red Sea shipping lanes. As a consequence, Middle Eastern crude exports to Europe fell by 22% in 2024, according to ship tracking data.

Energy consultant and former oil trader Adi Imsirovic highlights that these changing trade flows have fostered new, strategic alliances. Russia, India, China, and Iran are strengthening ties, altering the global oil trade dynamics. As Imsirovic points out, the oil market is no longer following the most cost-effective routes, which has led to a tighter shipping market. This, in turn, raises freight costs and ultimately impacts refining margins.

The United States, benefiting from a surge in shale oil production, has seen significant growth in its oil exports. The U.S. now exports 4 million barrels per day, increasing its share of the global oil trade to 9.5%, ranking behind Saudi Arabia and Russia.

Further reshuffling of trade routes has been influenced by the launch of the large Dangote oil refinery in Nigeria, the expansion of Canada's Trans Mountain pipeline, reduced oil production in Mexico, a temporary halt in Libyan oil exports, and the rising production volumes from Guyana.

Ongoing Market Challenges

Changes in oil demand forecasts have raised concerns over long-term growth expectations in the global oil market. According to experts, past assumptions about consistent demand growth cannot be relied upon as much anymore. Reduced demand from major markets, such as China and Europe, has added uncertainty to the outlook.

China’s oil imports declined by 3% last year due to the increasing popularity of electric and hybrid vehicles, alongside the rise in liquefied natural gas (LNG) usage in heavy trucking. In Europe, falling refining capacity and government policies aimed at reducing carbon emissions led to a 1% decrease in crude oil imports.

Emerging Suppliers and Trade Routes

In response to the changing dynamics, European refiners initially reduced their imports of Russian oil and increased their purchases from the U.S. and the Middle East after Russia’s invasion of Ukraine. The escalating conflicts in the Middle East and rising shipping costs, particularly in the Red Sea, led European refiners to increase imports from the U.S. and Guyana to unprecedented levels.

In 2024, exports from Iraq and the United Arab Emirates fell by 82,000 and 35,000 barrels per day, respectively. Conversely, European imports from Guyana increased by 162,000 barrels per day, while U.S. exports rose by 60,000 barrels per day. Meanwhile, fears of additional sanctions and tightening supply of Iranian oil prompted Chinese refiners to turn to alternative sources, including West Africa and Brazil.