(A refinery at the Port of Houston. Photo: Jim Allen / FreightWaves)
The Energy Information Administration’s (EIA) new short-term energy forecast confirms strong demand for 2025, but notes that the balance of supply and demand will shift toward oversupply in the middle of the year and 2026.
“We expect oil price pressures in the next two years, as we expect global oil production to grow faster than global oil demand.” EIA wrote. We forecast Brent crude oil prices to average $74/b in 2025, 8% lower than in 2024, and then continue to fall another 11% to $66/b in 2026.
Since the outbreak, the global oil market has navigated a complex landscape shaped by various economic, geopolitical and production-related factors. In the year By 2025, the outlook is fairly neutral, with forecasts pointing to downward pressure with relative stability in oil prices despite potential challenges on the horizon.
One of the main demand-side factors influencing the oil market is China’s continued economic growth. As the world’s second-largest economy, China’s appetite for oil plays a major role in shaping global oil consumption patterns. The ongoing expansion of China’s industrial sector and transportation infrastructure has significantly strengthened global oil demand, contributing to the stability of oil prices. In the year Global consumption is estimated at 104 million barrels per day (MB/d) by 2025, with China’s economic trajectory showing a positive impact on oil demand.
(Chart: EIA)
Geopolitical events, which are often a source of volatility in oil markets, are a key focus for the 2025 forecast. While turbulence is likely, current forecasts suggest that these events will not significantly disrupt the overall stability of oil prices. Factors such as international sanctions, particularly targeting major oil producers such as Russia, Iran and Venezuela, have affected the market by restricting the flow of crude oil. For example, US sanctions targeting more than 160 tankers linked to these countries have cut Iran’s crude exports by a third by 2024. Despite these measures, the global oil market has shown strong resilience, reducing the impact between supply and demand. Such disruptions.
In terms of production, the International Energy Agency outlines its strong outlook for both OPEC+ and non-OPEC countries. OPEC+ countries are said to increase their crude oil production significantly, with Saudi Arabia as the leading member increasing its production from 8.98 mb/d to 12.11 mb/d. Other key players, including Kuwait, Nigeria and the United Arab Emirates, are also expected to raise production levels, contributing to a total OPEC+ output of up to 40.67 mb/d. On the non-OPEC side, output is expected to grow by 1.5 mb/d in 2025, on par with last year, bringing total non-OPEC production to roughly 15.16 mb/d.
Brent crude futures, the main gauge of global oil prices, rose sharply in mid-January, hitting a four-month high of $81 a barrel (bbl), up $8 from the previous month. Likewise, West Texas Intermediate (WTI) prices remain strong, indicating overall stability projected for the oil market in 2025.
Demand forecasts reinforce the narrative of a stable oil market. The Organization for Economic Co-operation and Development raised its oil demand forecast by 250,000 barrels (kb/d) in the fourth quarter of 2024, reflecting a strong recovery in consumption patterns. For the whole of 2024, global oil demand growth is estimated to rise by 90 kb/d, bringing the total to 940 kb/d. This upward adjustment is a reflection of the recovering global economy and continued demand from emerging markets, particularly China. The question is whether it will be enough: The IEA expects a gradual oversupply to push prices down in 2026 and 2027.
The expected stability and modest decline in oil prices has significant implications for US manufacturing and industrial activity. $74 per barrel is a lot to generate positive margins in the Pemian Basin. A stable oil price creates a favorable environment for further investment in domestic oil production. U.S. oil producers can plan with greater certainty, which could lead to increased exploration and drilling activities. This in turn supports job creation and economic growth in the energy sector. Additionally, stable oil prices help maintain predictable input costs for industries dependent on petroleum products, creating consistent industrial activity and economic stability.
Despite the relatively healthy outlook, some challenges may threaten the stability of the oil market. Geopolitical tensions, while not expected to cause major disruptions, are a variable that can affect market volatility. The effectiveness of US sanctions and their long-term impact on oil exports from targeted countries will be critical in determining the extent of their impact on global supply. In addition, any unexpected economic slowdown or changes in energy policies, particularly those aimed at transitioning to renewable energy sources, could alter demand forecasts and price stability.
In 2025, the EIA forecasts the global oil market to remain stable, with continued demand driven by strong production capacity and China’s economic growth. While geopolitical events and sanctions present potential challenges, the market’s natural resilience and balanced supply-demand dynamics are expected to ensure price stability. This predicted stability would not only benefit global economies by ensuring predictable energy costs, but also support industrial activity and GDP growth, particularly in major oil-consuming countries such as the United States.
As the world continues to navigate complex energy needs and geopolitical tensions, the resilience of the oil market will be a critical factor in shaping economic outcomes. Interactions between OPEC+ and non-OPEC countries, combined with demand growth, especially in emerging economies, will set the stage for a relatively stable oil landscape in 2025. A stable but stable market environment as long as stakeholders from producer to consumer do not adjust to external disruptions and global economic growth continues as expected.
