The Global Oil Market in 2025: Structure, Pricing and Participants
Sharing my learnings about the oil market as I transition from mining technology sales into Physcial Commodites Trading.
The global oil market is an interconnected system of producers, refiners, traders, and infrastructure, all linked by benchmark pricing mechanisms. This article aims to explain the industry's key structures to help build a foundational understanding of how the market works.
At its core, oil is priced using market-based mechanisms. Crude oil is traded on major exchanges such as ICE for Brent and NYMEX for WTI, as well as through bilateral over-the-counter contracts. Prices are determined by global supply and demand dynamics. Because oil can be shipped globally at relatively low cost, arbitrage keeps regional prices closely aligned. If prices rise in one region, traders can redirect tankers to that market, smoothing out differentials. This makes oil a fungible commodity across borders and benchmarked in interconnected ways.
Three benchmarks anchor global pricing. Brent crude is a sweet blend from the North Sea and serves as the dominant reference for Europe, Africa and much of Asia. Approximately two-thirds of the world’s oil is priced relative to Brent, making it the most influential benchmark.
West Texas Intermediate (WTI), priced at Cushing, Oklahoma, reflects the U.S. domestic market. It is widely used in the Western Hemisphere for crude and remains the dominant market for futures trading.
Dubai/Oman, a medium sour grade, is the key benchmark for exports of Middle Eastern oil to Asia. These benchmarks allow buyers and sellers to agree on prices using a common reference, with differentials applied based on credit quality and delivery location.
The market’s key participants fall into three categories, producers, refiners and traders. Among the producers, the most influential include OPEC and its extended Alliance, OPEC+. OPEC includes 13 members, mostly in the Middle East, North and West Africa, plus Venezuela and Russia. These nations control about 60% of global oil exports. OPEC coordinates production levels among members, aiming to manage supply and stabilise or influence prices. Their decisions can quickly shift market sentiment and drive short-term price moves.
In contrast to OPEC+, U.S. shale producers are decentralised, price-sensitive, and guided by market forces rather than coordinated policy. Shale output surged in the 2010s due to advances in fracking, adding a flexible layer of supply to the global system. By 2025, the U.S. will produce around 9 million barrels per day, making it one of the world’s top producers. Most shale companies are independently owned and respond quickly to price signals, ramping up production when prices rise to capture higher margins, then cutting back when prices fall. This price-driven responsiveness, in contrast to OPEC+’s coordinated output management, remains a defining feature of the modern oil market.
National Oil companies play a major role in the market; these are state-owned oil producers like Saudi Aramco, Russia’s Rosneft, China Petroleum Corp, Iran’s NIOC, and Brazil's Petrobras, which hold the majority of the world's reserves and output 80%. A stark shift from decades past, when Western multinational firms dominated. NOCs vary in behaviour; some operate like commercial entities, while others are extensions of government policy.
For example, Saudi Aramco produces about 10million barrels per day but also pursues the kingdom's strategic goals (such as investing in refiners abroad or adjusting OPEC's strategy). NOCs in OPEC countries adhere to quotas, while those outside, like China, Canada and Norway, follow their governments' production targets or production goals. International oil companies IOCs the big investor firms like ExxonMobil, Shell, BP, Chevron, also play a role in production, especially as partners in other countries. But they command a much smaller slice of reserves compared to NOCs. These IOCs focus on technologically complex projects and operate in multiple countries.
Refiners form the demand side of the crude oil market. They purchase crude through spot deals and term contracts, processing it into fuels such as gasoline, diesel and jet fuel. Refiners optimise their inputs based on refinery configurations and margins, known as crack spreads. These margins, differences between crude oil prices and refined product prices, are closely monitored and often hedge against using financial instruments. Refining capacity is unevenly distributed worldwide, leading to significant trade in refined products. For example, U.S refiners frequently export diesel to Europe, while European refiners may import certain feedstocks.
Traders, both physical and financial, are the glue that holds the market together. Physical trading firms such as Vitol, Glencore, Trafigura and Gunvo move millions of barrels per day across the globe. They buy crude from producers, arrange shipping, storage and blending to sell to refiners. These traders exploit price differentials across regions or time (through arbitrage or contango strategies), ensuring market liquidity and efficiency. In parallel, financial traders, including hedge funds, banks and commodity funds, trade futures, options and derivatives. Their activity adds liquidity to the market, ensuring there is a buyer or seller for refiners or businesses looking to hedge exposure to oil price volatility.
Oil infrastructure is essential to its smooth operation. Pipelines connect producing regions to refineries and export terminals. In the U.S, pipelines connect oil fields in Texas, North Dakota or Alberta to refiners on the coasts. Pipelines offer high volume, continuous transport at a low cost per barrel. Pipeline networks in Russia and Central Asia send oil toward Europe, China or North America. Storage facilities are also important with strategic hubs like Cushing, Rotterdam and Fujairah. Storage facilities serve an important role for developing strategic reserves in case of emergencies and enabling traders to store oil when the market contango makes it profitable.
Several maritime chokepoints are vital for global flows. The Strait of Hormuz, linking the Persian Gulf to global markets, sees over 20million barrels per day pass through it, about a fifth of global consumption. It's the only sea route out of the Persian Gulf. Major OPEC producers like Saudi Arabia, Iraq, Kuwait and the UAE rely on this route to export to world markets, making it a key geopolitical watchpoint.
The SUEZ canal and the SUMED pipeline link the Red Sea and the Mediterranean, providing a critical shortcut for oil from the Middle East to Europe. The Strait of Malacca, connecting the Indian Ocean to the South China Sea, is critical to Middle East to Asia shipments. Any disruption in these routes, from conflict, piracy or logistical blockages, can quickly affect global oil prices.
The oil market is shaped by integrated global pricing, diverse participants and critical infrastructure. It is both physical and financial, reactive to geopolitical events, yet anchored by decade-old systems of trade and transport. While volatile and politically sensitive, the oil market remains remarkably efficient, delivering energy from the wellhead to refinery to the end user, with a vast adaptive network that responds to real-time global signals.