EMD064 - Macro Context: The Global Growth Problem

Welcome to Energy Markets Daily. Wednesday, November 26, 2025 — Macro Context. Crude oil is breaking down because global growth is too slow to support demand. Let's connect the dots. **The Global Growth Picture** The IMF projects global growth at 3.0% for 2025 and 3.1% in 2026. But that's the optimistic view. PwC expects global economic growth of just 2.6% in 2025 and 2.5% in 2026, down from 2.8% in 2024. The World Bank is even more cautious, anticipating a weakening to 2.3% in 2025. This is not the growth rate that drives oil demand. The Regional Breakdown: The U.S. economy is forecast to expand by just over 2%. Solid, but not strong. China's growth is expected to slow to around 4.5% to 5.0% in 2025. Goldman Sachs raised their forecast to 5.0%, but that's still a deceleration. The Eurozone is projected to grow just 0.9% in 2025, edging up to 1.4% in 2026 as Germany begins to recover. What's Driving the Slowdown: Geopolitical tensions. Rising protectionist policies. Elevated trade barriers. Policy uncertainty. This is the macro backdrop for crude oil. Weak global GDP equals weak oil demand. **The Oil Demand Problem** The IEA expects global oil demand to increase by just 710,000 barrels per day in 2025 and 700,000 barrels per day in 2026. OPEC is more optimistic, forecasting demand growth of 1.3 million barrels per day in 2025 and 1.4 million barrels per day in 2026. But even OPEC has revised its forecasts downward for the fourth consecutive month. JP Morgan expects global oil demand to expand by just 0.9 million barrels per day in 2025. The China Factor: China is the marginal buyer. The IEA anticipates China will see demand growth of just 220,000 barrels per day in 2025. Why? Electric vehicle adoption is accelerating. The property downturn continues to weigh on growth. China's oil demand is growing modestly, with support mainly coming from petrochemical feedstocks. **The Supply Surplus** Here's the problem: Supply is growing faster than demand. The IEA anticipates global oil supply to increase by 3 million barrels per day in 2025, reaching 106.1 million barrels per day. Non-OPEC+ production from the U.S., Brazil, Canada, and Argentina is driving the increase. JP Morgan forecasts that supply will grow at nearly three times the rate of demand in both 2025 and 2026, potentially leading to a significant supply surplus. The math is simple: 3 million barrels per day of supply growth versus 700,000 to 900,000 barrels per day of demand growth. That's a glut. **The Fed and The Dollar** The Federal Reserve lowered the federal funds rate by 25 basis points to 3.75% to 4.00% at its October 2025 meeting. The probability of a rate cut in December is around 79%, according to the CME FedWatch Tool. But here's the twist: The U.S. Dollar Index broke above 100 in November 2025, a key threshold that signals a fundamental shift in global monetary dynamics. A stronger dollar puts pressure on commodities, including crude oil, because it makes them more expensive for buyers using other currencies. U.S. inflation rose to 3% in September 2025 and is projected to remain above the Fed's 2.0% target for the remainder of 2025. The Fed is walking a tightrope: Cut rates to support growth, but risk reigniting inflation. **What It Means for Energy** Crude oil is breaking down because the macro backdrop is bearish. Global growth is too slow. Oil demand growth is anemic. Supply is growing three times faster than demand. The dollar is strong. Natural gas is decoupling because its demand drivers are structural, not cyclical. LNG exports. Data center demand. Electrification. This is why WTI is testing $58 while natural gas is holding above $4.40. **Catalyst Watch** Today: EIA Inventory Reports. Thursday: Thanksgiving. U.S. markets closed. December 1st: OPEC+ meeting. The reality check. **Final Word** The global growth problem is the crude oil problem. Weak GDP. Weak demand. Oversupply. Strong dollar. Natural gas is decoupling on structural demand. Trade the macro. For inquiries or introductions to energy capital sources: energymarkets@protonmail.com. Subject: Energy Capital. This is Energy Markets Daily. We'll see you Friday for the Weekly Recap.