The outlook is bearish due to an oversupply of Brent crude and tight oil demand. After reaching $80 in 2024, the average in 2025 is fixed at $74

International oil prices will fall by about 3% in 2024 as post-pandemic demand recovery stalls, China’s economy struggles, and the U.S. and other producers pump more crude into well-supplied global markets. It has fallen for the second consecutive year. Weak demand from importers and rising global supplies are likely to keep oil prices contained to around $70 in 2025.

Crude oil and natural gas markets in 2024 navigated a complex landscape of controlled supply and fluctuating demand, rising geopolitical tensions, macroeconomic weakness, and a continued focus on the energy transition. This resilience was reflected in the stability and strength of oil prices.

Also read: Morgan Stanley, HSBC slash oil supply forecast; Brent average pegged near $70 in 2025 after OPEC+ ruling

2024 Brent Crude Oil Price Review

Brent prices have fallen for the second consecutive year. According to Deloitte, Brent crude oil prices will remain within a monthly range of $74 to $90 per barrel with minimal monthly fluctuations in 2024, making 2024 the most stable in 25 years. It was one of those years.

Brent crude oil futures rose 65 cents, or 0.88%, to $74.64 a barrel on Tuesday, the last trading day of the year. U.S. West Texas Intermediate crude rose 73 cents, or 1.03%, to $71.72 a barrel. The Brent benchmark settled at about 3% from its 2023 final settlement value of $77.04, while WTI was roughly flat with last year’s final settlement value.

In September 2024, Brent crude oil futures closed below $70 per barrel for the first time since December 2021. In 2024, oil benchmarks largely traded below the highs seen in previous years, due to a post-pandemic demand recovery and the 2022 Russian commodity price shock. The invasion of Ukraine is beginning to fade.

Also read: Oil rises for the week after weak holiday trading on low US crude inventories and China’s stimulus outlook. Brent remains at $74 per barrel

Brent crude oil outlook in 2025

Oil prices in 2025 are likely to trade around $70 per barrel due to weak Chinese demand and rising global supplies, leading to oil prices led by the Organization of the Petroleum Exporting Countries and its allies (OPEC+). Efforts to strengthen the market will be offset. Brent crude oil, the global benchmark, is expected to average around $80 per barrel in 2024.

Analysts expect oil prices to hover between $70 and $80 in 2025, with the potential for a $10 rise if geopolitical tensions rise. According to Reuters, the average price of Brent crude oil in 2025 is likely to be $74.33 per barrel, down from the November estimate of $74.53, marking the eighth consecutive downward revision. . The average U.S. crude oil price in 2025 is expected to be $70.86, compared to last month’s forecast of $70.69.

At its December 2024 meeting, OPEC+, which supplies about half of the world’s oil, postponed the start of increased oil production by three months to April 2025 and extended the complete lifting of supply cuts by one year to the end of 2026. .

JPMorgan analysts predict supply will exceed demand by 1.2 million barrels per day (bpd). Major global investment banks Morgan Stanley and HSBC have also lowered their forecasts for next year’s oil market surplus. Brent crude oil prices were expected to reach $70 per barrel after the Organization of the Petroleum Exporting Countries (OPEC) decided to postpone and delay plans to increase crude oil production.

Related article: India’s oil demand growth will surpass China’s in 2024, trend to continue next year: S&P

The decision comes as oil prices have fallen 18% since June due to oversupply and low war-related risk premiums. Morgan Stanley raised its forecast for Brent in the second half of 2025 to $70 from $66-68. The bank lowered its production outlook for OPEC9 (excluding Iran, Libya and Venezuela, which are exempt from production cuts) by 400,000 barrels per day in 2025, and by 700,000 barrels per day by the fourth quarter of next year. I pulled it down.

It also reduced Iran’s production estimates by about 100,000 barrels per day by 2025. “In total, this means that Japan’s estimated surplus in 2025 will decrease from 1.3 million barrels per day to 800,000 barrels per day for Japan’s total liquid balance, and from 700,000 barrels per day to 300,000 barrels per day for crude oil alone. “balance,” Morgan Stanley said in a Thursday, Dec. 5, note.

Meanwhile, HSBC said in a note on Friday that it maintained its Brent oil price forecast for 2025 and beyond at $70 per barrel. The bank expects the oil market to be in surplus by 200,000 barrels a day in 2025 if OPEC goes ahead with its planned production increase in April. Previously, the company had expected a surplus of 500,000 barrels per day.

Also read: India’s state-run refiner may buy Middle East spot oil to make up for Russia’s shortfall

Bank of America (BoFA) expects Brent crude oil prices to average $65 per barrel in 2025, assuming OPEC production does not increase significantly. “Demand growth has slowed this year and is expected to remain low in 2025, pushing the market into surplus next year,” BoFA said. The bank said the weak demand outlook is OPEC’s Achilles’ heel, forecasting global oil demand growth to average 1 million barrels per day this year and 1.1 million barrels per day next year.

Investors are keeping an eye on the Federal Reserve’s outlook for rate cuts in 2025 after policymakers predicted a slowing trajectory at its December policy meeting due to persistently high inflation. Lower interest rates generally promote economic growth and supply demand for energy and oil.

What’s hurting the oil outlook for 2025?

-The weaker demand outlook, particularly in China, has forced both OPEC and the International Energy Agency (IEA) to revise downward their oil demand growth forecasts for 2024 and 2025. The IEA expects the oil market to be in surplus going into 2025, even after OPEC+ delays its plans. Due to falling prices, the company will begin increasing production until April 2025.

Also read: U.S. Federal Reserve cuts benchmark interest rate to 4.25% to 4.50% for third consecutive meeting, with a view to two rate cuts in 2025. 5 key highlights

– U.S. oil production rose by 259,000 barrels per day in October, the highest on record, as demand surged to the strongest levels since the pandemic, U.S. Energy Information Administration (EIA) data showed on Tuesday. The daily production amount was 13.46 million barrels. Production is expected to increase to a new record 13.52 million barrels per day next year.

-Some analysts still believe supplies could be tight next year depending on US President-elect Donald Trump’s policies, including sanctions. He has called for an immediate ceasefire in the Russia-Ukraine war and could reimpose a so-called maximum pressure policy on Iran, which could have a major impact on oil markets.

-China’s manufacturing activity expanded for the third month in a row in December, albeit at a slower pace, suggesting a new blitz of stimulus is supporting the world’s second-largest economy. Analysts expect the oil market to become even tighter in the new year due to sanctions on Iranian oil.

Also read: Saudi Aramco will take on more debt and focus on increasing dividends as oil prices slump, says CFO Ziad Almershed

– Prices rose On Tuesday, the US military announced it had carried out strikes against Houthi targets in Sanaa and Yemen’s coastal areas. Iranian-backed militants have been attacking merchant ships in the Red Sea for more than a year in solidarity with the Palestinians and threatening global oil flows, amid Israel’s year-long war in Gaza and in solidarity with the Palestinians.

“We expect oil prices to remain volatile. Crude oil has support at $70.75 to $70.10 and resistance at $72.00 to $72.50. At INR, support for crude oil is at $70.75 to $70.10. INR6,040-5,970, resistance is INR6,170-6,240. Traders are now awaiting US factory survey data which will provide further insight into the demand outlook,” said Rahul Kalantri, vice president of commodities at Mehta Equities.

Kalantri said the market is now bracing for a potentially turbulent year ahead. Concerns about oversupply, geopolitical risks, and the impact on the incoming Trump administration’s oil policy are further heightening the sense of caution.

Disclaimer: The views and recommendations provided in this analysis are those of the individual analysts or brokerage firms and not of Mint. Market conditions can change rapidly and individual circumstances may differ, so before making any investment decisions, consult a certified professional, consider your personal risk tolerance, and conduct a thorough We strongly encourage investors to do their research.