Crude Oil 2025 Forecast: Forecasters See Market in Surplus as Key Spread Disagrees

I’m slightly more bullish than the forecasters on the oil market in 2025

• Crude oil suffered its second yearly drop in 2024.
• Hope for stronger demand prompts higher prices to start 2025.
• Here’s where is oil headed this year and what traders should watch.
  

Crude oil prices (/CL) managed to post a small gain in 2024 of nearly 2%, settling the year at 71.62, up from 70.38 at the beginning of January. The gain followed a larger pullback from 2023 when oil prices fell almost 7%. However, we still saw some significant volatility, with a 24.4% spread between the yearly highs and lows at 86.91 and 65.75, respectively.

Concerns about demand—mainly from China—drove prices lower through the summer months, and shares traded in a narrow range in the fourth quarter, given uncertainty over the global economy.

Crude Oil starts 2025 on an upward path

Crude oil prices rose about 3.5% through the first three trading days of 2025. One of the drivers for this price action was a suspected polar vortex that was forecasted to blanket much of the Eastern United States with freezing temperatures. Because of that, the market expected a degree of supply would be taken offline. Some analysts expected those shut-ins to total nearly a million barrels per day.

Meteorologists have recently backed off somewhat from their forecasts for extreme cold, which should help to avoid deep shut-ins, there still could be some impact on market prices as colder weather moves into the states.

Moreover, there was some weakness in the growth of supply for crude oil from the United States in the fourth quarter of 2024 despite supply levels remaining near record highs.

China to support oil prices?

The best hope for oil bulls in 2025 will come from China. Two expectations are that fiscal and monetary measures will increase this year to stimulate China’s domestic economy. If so, that would likely result in strong oil demand as well. And with China still the largest crude importer in the world, this holds the key for prices this year.

Earlier this week, advising the National Committee of the Chinese People's Political Consultative Conference, Chinese President Xi Jinping said China will be “more proactive” in supporting economic growth in 2025. China expects 5% growth in gross domestic product (GDP), but forecasters are a bit pessimistic about that target, with some estimates ranging in the low to mid 4s.

China has already taken some steps to boost domestic demand aimed at consumption—one of the weak spots in its economy. A national trade-in program will apply to smartphones and some other electronics, expanding a program that already includes dishwashers and the like. The move offers some confidence that China is getting more serious about stimulus efforts.

Short-term indicators, such as purchasing managers indexes, have pointed to some growth going into 2025, an encouraging signal. Altogether, China’s economy on a month-to-month basis will likely influence the direction of crude oil prices through this year.

OPEC and geopolitical winds

In December, the Organization of the Petroleum Exporting Countries (OPEC) delayed the rollback of previous production cuts by three months, pushing back the added supply until April. The cartel also pushed back the full unwinding of those cuts until the second half of 2026.

While the move itself was bullish for the oil complex bcause it leaves less supply on the market, the underlying implications are bearish. It shows OPEC doesn’t have confidence that the market can absorb the additional product.

The dollar started to decline in the first half of January after a report from The Washington Post showed the Trump administration was considering a limited scope for tariffs. The news drove the dollar down and cleared some upside for commodity prices, which are sensitive to global economic conditions.

Previously, the dollar strengthened after the U.S. election declared President-elect Donald Trump the winner because his tariff policies were feared to have a negative impact on U.S. trading partners. Trimming back this policy by the incoming administration is likely a net benefit for oil consumption in 2025.

Forecasting the oil market in 2025

The International Energy Agency (IEA) says the global oil market will be well supplied this year. The IEA says non-OPEC+ supply will rise by 1.5 million barrels per day in 2025, with growth coming from the United States, Canada and elsewhere. The IEA’s December Oil Market Report (OMR) stated:

“The decision by OPEC+ to delay the unwinding of its additional voluntary production cuts by another three months and extend the ramp-up period by nine months through September 2026 has materially reduced the potential supply overhang that was set to emerge next year. Even so, persistent overproduction from some OPEC+ members, robust supply growth from non-OPEC+ countries and relatively modest global oil demand growth leaves the market looking comfortably supplied in 2025.”

The U.S. Energy Information Administration (EIA) also calls for a rise in supply in the global market, with growth of 1.6 million barrels per day in 2025. The agency also said most of the growth in production will occur outside of OPEC+. The EIA sees the average price of Brent crude oil at $74 per barrel for the year, according to the December Short-Term Energy Outlook (STEO).

Moreover, a survey of economists and analysts from Reuters puts the price of oil in 2025 at near $74 per barrel. The survey polled 31 people and marked its eighth downward revision. Particularly, JPMorgan predicts the market surplus for oil will reach 1.2 million barrels per day in 2025.

Key Points

• Crude oil prices rose nearly 2% in 2024 amid concern over demand, following a 7% decline in 2023, highlighting significant yearly volatility.
• The increase in crude oil prices at the start of 2025 was driven by anticipated severe U.S. winter weather affecting supply and ongoing U.S. production weakness, as well as a weaker U.S. dollar as President-elect Trump’s trade agenda came into focus.
• China's economic stimulus efforts and crude demand are expected to play a crucial role in supporting oil prices in 2025, but they may come too late.
• OPEC's delayed production cuts signal cautious market management, while non-OPEC+ supply growth is projected to keep the market well-supplied in 2025, according to forecasters.

Altogether, the oil market appears to be heading into a time of ample supply amid non-OPEC production growth and persistently weak demand from China. Geopolitical disruptions likely pose the largest risk to the market.

Analysts will likely remain focused on demand from China, supply outside of OPEC and the decision by OPEC+ to continue its delay of rolling back voluntary production cuts. The shifting agenda on trade from the incoming Trump administration and its impact on the dollar will also likely remain at the forefront in the global oil market.

One caveat to note is the strength in time spreads currently observed in the crude oil complex. The prompt spread in WTI rose above 80 cents per barrel in early January, marking the highest level since September. The spread—seen as a proxy for physical demand by some traders—signals that the market is tightening and should lead to additional strength in crude oil prices, at least in the short term.

Personally, I’m slightly more bullish on the oil market in 2025 compared to forecasters. The prevailing price action at the start of the year in combination with the behavior in prompt spreads signals forecasters may be too pessimistic on at least the short-term outlook.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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