Oil News: Will Oversupply Overshadow Stimulus-Led Demand in 2025?

Crude Oil Prices Higher as Market Eyes 2025 Supply and Demand Outlook

Light crude oil futures rose sharply during Tuesday’s shortened trading session, driven by algorithmic buying as prices moved above the critical 50% retracement level at $71.10. This technical breakout could establish new support, setting the stage for further gains toward the 200-day moving average. If breached, this indicator may accelerate upward momentum. Conversely, a drop back below $71.10 would likely lead to rangebound trading, with key support levels at the 50-day moving average of $69.22 and the Fibonacci retracement level at $68.69.

At 17:04 GMT, Light Crude Oil Futures are trading $71.76, up $0.77 or +1.08%.

Oil Prices Poised for Second Consecutive Annual Loss

Despite Tuesday’s gains, oil prices remain on track to post a second consecutive year of annual losses. As of the latest session, Brent crude was down approximately 3.4% year-to-date, trading below the 2023 close of $77.04. West Texas Intermediate (WTI) crude slipped about 0.4% from last year’s final price of $71.65. Brent’s dip below $70 per barrel in September marked the first sub-$70 close since December 2021, reinforcing bearish sentiment.

Brent’s peak in 2024 at $91.17 was the lowest annual high since 2021, reflecting waning price shocks from Russia’s 2022 invasion of Ukraine and a slowdown in post-pandemic demand recovery.

Supply and Demand Factors Weigh on 2025 Price Projections

Oil prices face significant headwinds heading into 2025, with the market bracing for weak demand from China and rising global supplies. A Reuters poll suggests Brent may remain constrained near $70 per barrel next year, with China’s sluggish economic outlook exerting downward pressure. Both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) have revised their demand growth forecasts lower for 2024 and 2025.

Despite extended output cuts by OPEC+, non-OPEC supply growth is expected to create a surplus as the IEA anticipates oversupply conditions persisting into 2025. OPEC+ postponed planned production increases to April 2025, citing falling prices and deteriorating demand projections.

Geopolitical and Economic Drivers to Watch

Markets are closely monitoring the Federal Reserve’s interest rate trajectory for 2025. Lower rates typically encourage borrowing and economic expansion, which could provide a modest boost to oil demand. Additionally, the incoming U.S. administration’s policies on trade, energy, and foreign affairs may influence price stability. Potential re-imposition of sanctions on Iran and a shift in U.S. foreign policy could introduce geopolitical volatility.

China’s recent economic data showed manufacturing activity expanded for the third consecutive month in December, supported by government stimulus measures. However, Nigeria’s plans to raise oil production to 3 million barrels per day (bpd) in 2025 from the current 1.8 million bpd could offset bullish demand signals.

Market Forecast

Crude oil prices are likely to remain under pressure in the near term, with potential for rangebound trading between $68 and $72 per barrel. The market’s ability to sustain gains above $71.10 will be pivotal. While short-term support from technical buying is evident, the broader outlook remains bearish due to rising supply and weak demand projections for 2025.

More Information in our Economic Calendar.