Heading into 2025, oil prices are expected to be weaker compared to 2024. MARC Ratings forecasts that oil prices in 2025 will likely range between US$65/barrel and US$75/barrel considering the interplay of geopolitical tension, demand constraint, and supply stability, while the oil price in 2024 is expected to average around US$80/barrel.
The global crude oil market is grappling with multiple challenges, each exerting pressure on the near-term price trajectory. Despite
OPEC+ production cuts, slow demand growth and diminishing geopolitical risk premiums have kept Brent oil prices below US$80 per barrel since the third quarter of 2024.
Despite diminishing effects, geopolitical tensions continue to drive short-term oil price volatility, with recent spikes reflecting heightened instability in the Middle East. Iran’s energy infrastructure, meanwhile, remains intact.
A disruption in production or along the transit routes could trigger a sharp surge in crude oil prices; based on MARC Ratings’ estimates, a 10% reduction in oil supply could potentially drive prices up by 12%.
In terms of demand, the ongoing loosening of global interest rates, particularly in the US, could revitalise manufacturing activity and weaken the dollar in 2025. However, dollar weakness will depend on bond yield movement influenced by shifts in US policy on public spending.
Global demand for crude oil may follow suit, though the pace and scale of this recovery would remain uncertain. In 2024, weaker-than-expected macroeconomic performance has led to global consumption growth decelerating to 1.0% (2023: 2.1%; 2022: 2.6%).
China, the world’s largest oil importer, saw its imports drop by 3.5% through the first 10 months of 2024 (10M2023:14.5%).
Global consumption of oil could improve to 1.2% in 2025 as global easing of interest rates takes effect, alongside a recovery in demand from China. However, China’s growth faces increased downside risks due to the potential rise in US protectionism following Donald Trump’s victory in the recent presidential election.
On the supply side, the production of global crude oil and other liquid fuels is projected to grow by 2.0% in 2025 (2024: 0.6%; 2023: 1.8%), largely driven by increased output from the US, where production is expected to expand by 2.3%, according to data from the Energy Information Administration (EIA).
This growth aligns with Republican policies prioritising energy security, where potential deregulation of traditional energy policies could further boost output.
Additionally, OPEC+ plans to begin easing its production cuts at the end of December 2024, increasing supply to the market. Therefore, persistently high output, coupled with oversupply concerns, is expected to place downward pressure on prices, barring any significant
geopolitical disruptions.
However, MARC Ratings’ projection of US$65/barrel and US$75/barrel for 2025 is subject to upside risk factors, including a potential escalation of geopolitical conflicts involving key oil suppliers, stronger-than-expected economic performance in the US and China, and the extension of production cuts by the OPEC+ bloc.
