Oil Prices Face Uncertainty in 2025
As the global energy landscape continues to evolve, oil prices are expected to remain stagnant, hovering around $70 a barrel in 2025. According to a recent poll of 31 economists and analysts, weak demand from China and rising global supplies will likely counterbalance efforts by OPEC+ to stabilize the market.
China’s Demand Woes
The world’s top oil importer, China, has been experiencing sluggish demand, which is expected to continue into 2025. This decline is attributed to the country’s shift towards electric vehicles, a trend that is likely to limit demand growth. As a result, Brent crude, the global benchmark, is projected to average $74.33 per barrel in 2025, down from its current average of around $80 a barrel.
Rising Non-OPEC Production
The poll respondents expect the oil market to be in a surplus next year, driven by rising production from non-OPEC countries. This increased supply is anticipated to keep the market well-supplied, limiting OPEC+’s ability to raise production. In fact, analysts from JPMorgan predict that supply will outpace demand by 1.2 million barrels per day (bpd) in 2025.
OPEC+ Response
In response to these market dynamics, OPEC+ has pushed back the start of oil output rises by three months until April 2025 and extended the full unwinding of cuts by a year until the end of 2026. This decision was driven by the expectation that non-OPEC+ supply growth will outpace demand growth in 2025, leaving limited room for OPEC+ to raise production.
Global Oil Demand
Global oil demand is expected to grow between 0.4 million and 1.3 million bpd in 2025, a relatively modest increase compared to OPEC’s 2025 growth estimate of 1.45 million bpd. This growth will be driven by an economic recovery in China, although the shift to electric vehicles will limit demand growth.
US Politics and Oil Prices
The upcoming change in US administration in January 2025 is expected to bring substantial policy shifts, including tariffs, deregulation, and tax amendments. However, analysts believe that US politics will have a limited impact on oil prices and the US domestic oil & gas sector. One potential exception is the implementation of intensified sanctions on Iranian oil exports, which could offer short-term support to oil prices.
Uncertainty Ahead
As the oil market navigates these complex dynamics, one thing is clear: 2025 will be a year of uncertainty for oil prices. With weak demand from China, rising global supplies, and OPEC+’s limited ability to raise production, oil prices are likely to remain constrained near $70 a barrel.
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