LONDON, Dec 31 — Oil prices were little changed on Wednesday and are set to fall more than 15 per cent over the course of 2025, as oversupply concerns grew in a year marked by wars, higher tariffs, OPEC+ output, and sanctions on Russia, Iran, and Venezuela.
Brent crude futures, down nearly 18 per cent, the most substantial annual percentage decline since 2020, are on track for a third straight year of losses, their longest-ever losing streak. U.S. West Texas Intermediate crude was headed for a 19 per cent annual decline.
BNP Paribas commodities analyst Jason Ying expects Brent to dip to US$55 a barrel in the first quarter, then recover to US$60 a barrel for the rest of 2026, as supply growth is likely to normalise while demand remains flat.
"The reason why we are more bearish than the market in the near term is that we think that United States (US) shale producers were able to hedge at high levels.
"So the supply from shale producers will be more consistent and insensitive to price movements," he said.
The 2025 average prices for both benchmarks are the lowest since 2020, LSEG data showed. Brent futures rose nine cents to US$61.42 a barrel at 1030 GMT, while U.S. West Texas Intermediate crude was at US$58.05, up 10 cents.
US crude and fuel inventories rose last week, market sources said, citing American Petroleum Institute figures on Tuesday. The US Energy Information Administration will release its data later on Wednesday.
Prices cool after strong start
Oil markets had a strong start to 2025 when former President Joe Biden left office, imposing tougher sanctions on Russia and disrupting supplies to top buyers China and India.
The war in Ukraine intensified when Ukrainian drones damaged Russian energy infrastructure and disrupted Kazakhstan's oil exports, and the 12-day Iran-Israel conflict in June threatened shipping in the Strait of Hormuz, a major route for global seaborne oil, which fanned oil prices.
Adding to geopolitical tensions in recent weeks, top OPEC producers Saudi Arabia and the United Arab Emirates are engaged in a crisis over Yemen, and US President Donald Trump has ordered a blockade on Venezuelan oil exports and threatened another strike on Iran.
But prices cooled after OPEC+ accelerated its output increases this year, and as concerns about the impact of US tariffs weighed on global economic and fuel demand growth.
OPEC+
The Organisation of the Petroleum Exporting Countries and its allies have paused oil output hikes for the first quarter of 2026 after releasing some 2.9 million barrels per day into the market since April. The next OPEC+ meeting is on January 4.
Most analysts expect supply to exceed demand next year, with estimates ranging from the International Energy Agency's 3.84 million barrels per day to Goldman Sachs' two million bpd.
"If the price really has a substantial fall, I would imagine you will see some cuts (from OPEC+). But it probably does need to fall quite a bit further from here on — maybe in the low US$50s.
"If today's price simply prevails, after the pause in Q1, they’ll probably continue to unwind these cuts," said Morgan Stanley's global oil strategist Martijn Rats.
JTD Energy managing director of consultancy John Driscoll expects geopolitical risks to support oil prices despite fundamentals pointing to an oversupply.
"Everybody is saying it will get weaker into 2026 and even beyond. But I would not ignore the geopolitics, and the Trump factor is going to be playing out because he wants to be involved in everything," he said.
