Oil Prices Poised for Downward Trend
The global oil market is bracing for a surplus in the next two years, driven by a mismatch between production growth and demand. According to the U.S. Energy Information Administration’s (EIA) latest Short-Term Energy Outlook report, this imbalance will put downward pressure on oil prices.
Slowing Demand Growth in Key Markets
The world’s largest energy consumers, the United States and China, have experienced a significant slowdown in demand growth in 2024. This trend is expected to continue, contributing to an oversupplied oil market this year.
Price Projections
The EIA forecasts Brent crude oil prices to decline by 8% to an average of $74 a barrel in 2025, followed by a further drop to $66 a barrel in 2026. Similarly, U.S. crude prices are expected to average $70 per barrel in 2025 and fall to $62 per barrel next year.
Record U.S. Oil Production
The EIA has revised its estimate for U.S. oil production this year, predicting a record 13.55 million barrels per day. This upward revision is largely attributed to the Permian Basin of Texas and New Mexico, which is expected to account for more than half of the country’s output in 2026.
Global Production and Demand
Globally, oil and liquid fuel production is expected to average 104.4 million barrels per day in 2025, a slight increase from previous forecasts. This growth is driven by the Organization of Petroleum Exporting Countries’ (OPEC) decision to ease supply curtailments and expectations of increased output from non-OPEC producers. Meanwhile, global demand is projected to average 104.1 million barrels per day, down from previous estimates and still below pre-pandemic levels.
Shifting Market Dynamics
The EIA’s report highlights the changing landscape of the global oil market, with the United States emerging as a major player. As production growth outpaces demand, oil prices are likely to remain under pressure in the coming years.
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