Oil Price Forecast For 2025 – WTI Oil Will Test The $60 Level

As usual, WTI oil was volatile in 2024. The market moved back and forth as traders reacted to geopolitical developments and demand forecasts. At the end of the year, WTI oil is trading below the levels seen on December 31, 2024. What’s next for WTI oil in 2025?

OPEC+ In Focus

OPEC+ remains a key player in the oil market. The organization managed to maintain its unity despite various geopolitical developments and the loss of market share.

Next year, its unity will be tested. Most likely, president-elect Donald Trump will encourage U.S. domestic oil production, so OPEC+ will continue to lose its market share.

At some point, the unity of OPEC+ may break, which is a key risk for the oil market. In the near term, this scenario does not look probable. However, it remains to be seen whether all OPEC+ members will be patient when they continue to lose market share to non-OPEC+ producers in 2025.

Any worries about the potential breakup of OPEC+ may lead to a significant decline in the oil markets. Currently, OPEC+ cuts its production by as much as 2.2 million bpd, so there is lot at stake.

China Is The Key Demand Catalyst

Global oil demand is projected to increase by 1.1 million bpd in 2025. This number is less than the size of OPEC+ production cuts, which is a significant problem for oil bulls.

There’s another problem: non-OPEC+ supply is steadily rising. Thus, demand must exceed current expectations for WTI oil to have a chance for sustainable upside.

The European economy remains under strong pressure as it lost access to cheap energy. The Manufacturing PMI numbers point to a severe crisis in the European manufacturing sector, and it remains to be seen whether EU will be able to reverse the current trend in the next year. At this point, this scenario look unlikely.

China may have provided significant support to oil markets, but its economy did not manage to fully recover after the coronavirus pandemic. The country’s economy has two key problems. First, the local population does not want to spend money as much as it used to before the pandemic, and government’s attempts to boost domestic consumption have yielded mixed results.

Second, U.S. – China tensions increase month after month. U.S. is an extremely important trade partner for China, and current problems in relations with the U.S. hurt China’s economy.

China’s government responded with multiple rounds of stimulus measures, but it was not able to provide sufficient support to the country’s economy. In case China fails to boost economic activity in 2025, oil markets may find themselves under more pressure.

Geopolitical Developments Do Not Provide Long-Term Support

The year 2024 was full of geopolitical developments, which have sometimes provided short-term support to oil markets.

Traders worried that Middle East oil supplies could be hurt or that Russia’s oil exports would decline as a result of sanctions. However, oil kept flowing, and the geopolitical premium in the oil markets has decreased.

The only catalyst that can provide long-term support to oil markets is a potential destruction of oil facilities or severe and effective sanctions on a major oil producer.

While traders have seen rockets flying in the Middle East and an oil price cap for Russian oil, none of these developments had any material impact on the market in the long-term.

U.S. Dollar’s Rally May Put More Pressure On Oil Markets

Strong U.S. dollar puts pressure on dollar-denominated commodities. This year, U.S. dollar gained plenty of ground against a broad basket of currencies.

U.S. Dollar Index has recently tested multi-year highs and settled near the levels last seen in late 2022.

Forex traders focused on Trump’s economic policy and hawkish Fed, which has recently made significant changes to its economic projections.

It should be noted that U.S. Dollar Index is well below the highs that were reached back in 2022. U.S. economy outperforms other major economies, so demand for the American currency may continue to grow, pushing U.S. Dollar Index towards new highs and putting additional pressure on oil markets.

Where Are The Positive Catalysts?

The lack of material positive catalysts is a big problem for oil bulls. Demand is not growing as fast as necessary for sustainable upside in the oil markets, while geopolitical developments do not hurt oil supplies.

Most analysts believe that the market will see a surplus next year, and it remains to be seen whether any development may change this outcome.

At this point, the potential increase in China’s demand looks like the most probable positive catalyst for oil markets, as there is almost nothing that can hurt the supply side of the market.

Thus, traders will need to monitor China’s data carefully to watch for the signs indicating that the country’s economy has finally started to move in the right direction.

The Technical Picture

Taking a look at the technical picture, WTI oil found strong support near the $67.00 level. This support level has been tested many times and proved its strength.

Currently, WTI oil consolidates in a range between the support at $67.00 and the resistance at $72.50. WTI oil has been inside this range since mid-October, which indicates that the selling pressure is strong, although it is not sufficient to push WTI oil below the key $67.00 level.

A move below the $67.00 level will signal that WTI oil is ready to start a new trend and move towards the $50 – $60 range. Such a move would be a true test for OPEC+ members, who will see that their production cut strategy does not pay off.

On the upside, WTI oil needs to climb above the $77.50 level to have a chance to gain sustainable momentum in 2025. Most likely, WTI oil will need material fundamental catalysts for such a move.

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