Analysts Are Bearish on Crude Oil in 2025
Rising non-OPEC+ production and only modest growth in global oil demand will leave the market well-supplied next year, analysts say, as they remain cautiously bearish on crude oil prices amid a myriad of uncertainties in 2025.
At the end of 2024, investment banks said they expect oil prices to stay around the current levels for 2025—in the low $70s per barrel Brent—with risks skewed to the downside on potential escalation of trade tensions.
Analysts and traders are aware that the only certain thing about oil price forecasts is that they turn out to be wrong. But with the current market fundamentals and geopolitical events, experts are more bearish than bullish on oil prices next year.
The oil market will see a surplus next year even if OPEC+ begins to unwind its production cuts in April 2025 as currently planned, most analysts and investment banks say.
In early December, the OPEC+ group decided to delay the start of the easing of the 2.2 million bpd cuts to April 2025, from January 2025. The group also extended the period in which it would unwind all these cuts into the following year, until September 2026.
Due to the OPEC+ decision, next year’s surplus may not be as large as previously feared, but a surplus we will see, banks say.
“For now, we expect the oil market to be in surplus next year – although much will depend on OPEC+ production policy,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a recent note.
Oil demand growth will stay “fairly modest” in 2025 due to both cyclical and structural factors, the strategists said.
“In addition, we see another year of strong non-OPEC supply growth while OPEC still sits on a significant amount of spare production capacity, which should continue to provide comfort to the market,” they added.
The International Energy Agency (IEA) has long been predicting a large surplus in 2025.
Even if OPEC+ keeps its oil production as-is for the whole of 2025, there would still be a surplus in supply of 950,000 barrels per day (bpd) next year, the IEA said in its monthly report last week.
If OPEC+ does begin unwinding the voluntary cuts from the end of March 2025, this glut will swell to 1.4 million bpd, according to the agency.
Global oil demand is set to rise by 1.1 million bpd next year, but it wouldn’t be able to absorb all the non-OPEC+ growth in supply coming mainly from the United States, Brazil, and Guyana, the IEA says.
OPEC also acknowledges demand has been lower this year than initially expected due to disappointing consumption figures coming out of China. The cartel last week revised down its demand growth projection for 2024 for a fifth consecutive month.
The unwinding of the OPEC+ cuts, if it is executed as planned at the latest meeting of the group, would lead to an average global inventory build of 100,000 bpd beginning in the second quarter, the EIA said in its Short-Term Energy Outlook (STEO) for December.
“We forecast that inventory builds will put some downward pressure on crude oil prices later in 2025, with Brent falling from an average of $74/b in 1Q25 to an average of $72/b in 4Q25,” the EIA said.
The administration expects an average annual Brent Crude price of $74 per barrel in 2025, down from an average of $80/b this year.
Analyst polls in recent months have also shown this trend—experts have been downgrading oil price forecasts amid weaker demand and strong supply growth.
Brent Crude prices are set to average $74.53 per barrel next year as weaker global demand growth and enough supply would offset the impact of a potential delay to the OPEC+ cuts, said 41 analysts and economists in the Reuters monthly survey for November.
Stricter U.S. sanctions against Iran under Donald Trump and geopolitical tensions could provide some support to prices early next year, but overall, expected tepid demand will weigh down on oil prices, according to analysts.
China’s looser monetary policy could revive the economy and boost demand for oil, but President-elect Trump’s promise to raise tariffs on China could weigh on economies, with tit-for-tat tariffs presenting a further downside risk to trade, economic growth, and oil demand growth.
The latest Chinese stimulus and potential further loosening of the monetary policy “could also be key for China to offset tariff threats from the US in 2025 and the move shows determination in quest to avoid a sharp economic slowdown,” Saxo Bank said last week.
Wild Cards
The incoming Trump Administration and geopolitics with the Middle East and the Russia-Ukraine war are the biggest wild cards for the world and economies next year.
Tariff threats and escalating trade tensions between the U.S. and all its trade partners – including Canada – present downside risks to oil prices. So does a strengthening U.S. dollar, amid all the tariff talk, as crude would become more expensive for holders of other currencies.
The uncertainties in 2025 could propel gold prices to new record highs, as gold would be a move to safe-haven assets amid escalating trade tensions, ING says.
“Overall, we hold a somewhat bearish view on large parts of the commodities complex for 2025 on the back of relatively comfortable fundamentals, while expectations of a stronger USD should also provide some headwinds,” ING’s strategists note.
“In addition, external risks facing markets appear to be skewed to the downside.”