The U.S. refining capacity is expected to drop by about 3 percent by the end of 2025, reaching 17.9 million barrels per day, the U.S. Energy Information Administration (EIA) said. Despite this decrease, refinery margins for gasoline and diesel (crack spreads) are predicted to remain steady after several years of decline.
Major refineries are set to close soon, with LyondellBasel’s Houston refinery shutting down in early 2025, reducing capacity by 264,000 barrels per day. Phillips 66 plans to close its Los Angeles refinery by late 2025, cutting another 138,700 barrels per day.
With crack spreads holding steady, U.S. gasoline prices are forecasted to average around $3.20 per gallon, and diesel around $3.60 per gallon in 2025, which is beneficial for consumers.
Brent crude oil is expected to average $76 per barrel in 2025, with global oil inventories rising in mid-2025 due to increased production from OPEC+ and other areas. Key uncertainties include geopolitical conflicts and OPEC+ production adherence.
U.S. distillate fuel demand, which includes diesel, is projected to grow by 4 percent in 2025, driven by manufacturing growth and higher demand from the trucking industry.
Global consumption of liquid fuels is expected to reach a record 104.4 million barrels per day in 2025, with most of the growth coming from Asia, particularly India, where transportation fuel demand is surging.
EIA’s winter fuel expenditure forecasts remain stable, with no major changes anticipated despite a warmer-than-expected start to the season.
India is expected to drive 25 percent of global oil consumption growth through 2024 and 2025. Global liquid fuel demand is forecasted to grow by 1.0 million barrels per day (b/d) in 2024 and 1.2 million b/d in 2025.
Geopolitical risks and OPEC+ cuts may push oil prices up in early 2025, with Brent crude expected to average $78 per barrel in Q1. However, production growth should lead to inventory builds by Q2, causing Brent prices to fall to an average of $74/b in the latter half of 2025.
The Henry Hub natural gas spot price is projected to rise to $2.80 per MMBtu in early 2025 due to seasonal winter demand. Following a drop to under $2.00/MMBtu in early November due to mild temperatures, prices should stabilize at an average of $2.90/MMBtu in 2025, with U.S. LNG export demand remaining high.
U.S. natural gas production is expected to remain stable at 113 billion cubic feet per day (Bcf/d) in 2024, with a 1 percent increase to 114 Bcf/d in 2025, driven mainly by growth in the Permian Basin.
The U.S. power sector is expected to see a 3 percent increase in generation in 2024, largely due to higher air-conditioning demand from hotter summer temperatures. This increase will be powered mainly by natural gas (up 3 percent from 2023) and solar energy (up 34 percent). Solar generation is forecasted to grow by 31 percent in 2025 as solar capacity expands, while rising natural gas prices are expected to slightly dampen its contribution to electricity demand.