Rising supply and potentially weaker-than-expected demand are set to keep oil prices in check this year, with the price likely to average in the low $70s, analysts and investment banks say.
With the U.S. new administration, experts expect the average price to be lower compared to last year amid concerns about demand as economic uncertainty spiked with the start of the trade and tariff wars.
On the supply side, OPEC+ early this month confirmed it would begin adding barrels to the market as early as next month. Of course, OPEC+ left the door open to any changes to its supply in any direction, saying in the press release that it remains “adaptable to evolving conditions,” and “Accordingly, this gradual increase may be paused or reversed subject to market conditions.”
Wall Street Banks See Oil in the Low $70s
President Donald Trump’s trade policies threw market analysts a curveball, increasing the uncertainty about this year’s demand prospects if economies slow as a result of the tariffs.
Earlier this week, Goldman Sachs cut its year-end forecast for Brent Crude prices, citing expectations of slower U.S. economic growth and additional OPEC+ supply.
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“While the $10 a barrel selloff since mid-January is larger than the change in our base case fundamentals, we reduce by $5 our December 2025 forecast for Brent to $71,” the investment bank’s research team said in a note, adding that “The medium-term risks to our forecast remain to the downside given potential further tariff escalation and potentially longer OPEC+ production increases.”
The tariff wars and high spare capacity at OPEC+ producers are skewing the oil price risk to the downside in the medium term, Goldman Sachs has also said.
HSBC analysts also see risks in oil skewed to the downside amid expectations of a surplus this year and next. Stronger supply growth compared to more sluggish demand growth would leave the oil market in a 200,000-bpd surplus this year, the bank said in a note. In the previous market view, HSBC expected a relatively balanced oil market in 2025.
Analysts at Barclays see Brent Crude prices at $74 per barrel this year, down by $9 from the previous forecast, as they slashed their global demand growth estimate in mounting economic uncertainties.
“We turn neutral on oil prices relative to the curve and consensus, as we revise down our 2025 demand outlook 510,000 barrels per day due to soft high-frequency indicators and elevated economic uncertainty,” Barclays analysts wrote in a note last week carried by Reuters.
The UK-based bank now sees this year’s demand growth at 900,000 bpd.
Barclays expects U.S. crude oil production to increase by the end of this year by just 200,000 bpd compared to the end of the fourth quarter of 2024.
Wood Mackenzie also expects oil prices to be lower this year compared to 2024.
Brent crude oil prices are projected to average $73 per barrel in 2025, down by $7 per barrel from 2024, due to expectations that supply would likely outstrip demand, Wood Mackenzie’s latest monthly oil market outlook showed. The $73 per barrel forecast for this year was revised down by $0.40 from the early February monthly report.
“We’re seeing a complex interplay of supply and demand factors. While global demand is expected to increase by 1.1 million barrels per day in 2025, non-OPEC production is forecasted to rise by 1.4 million barrels per day, potentially outpacing demand growth,” said Ann-Louise Hittle, Vice President of Oils Research at Wood Mackenzie.
Key Oil Market Drivers
OPEC+ supply and the U.S. trade policies (and their effect on economies) will be the two key driving factors for oil prices this year, WoodMac says, although there are also many geopolitical issues at play, including talks on a ceasefire in Ukraine and President Trump’s “maximum pressure” campaign on Iran.
WoodMac expects global economic growth at 2.8% for 2025, but this could be adjusted downward by around 0.5 percentage points depending on potential trade war scenarios.
Weaker economic growth could reduce oil demand growth by about 400,000 bpd from WoodMac’s current forecast of a 1.1 million bpd increase for 2025.
In case oil demand weakens, the annual average for Brent crude could be $3 to $5 per barrel lower than the $73 per barrel forecast, the energy consultancy says.
All these projections will depend on OPEC+ actions in terms of supply, U.S. trade and tariff policies, and global economic conditions, WoodMac noted.
For now, OPEC continues to see robust oil demand growth for both 2025 and 2026. The cartel left its demand outlook unchanged in its Monthly Oil Market Report (MOMR) last week. OPEC expects global oil demand to grow by 1.4 million bpd in each of 2025 and 2026.
The International Energy Agency’s monthly report, however, was bearish, as it has been typical of the IEA on oil demand for several years. The Paris-based agency expects growth to be just over 1 million bpd this year, with total global oil reaching 103.9 million bpd.
While this would be an acceleration from the estimated 830,000 bpd growth in 2024, the IEA predicts in its current balances that global oil supply may exceed demand by around 600,000 bpd this year.
By Tsvetana Paraskova for Oilprice.com
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