Oil Markets Recap: Prices Sink 20% Over the Course of 2025

Oil Prices Suffer Worst Annual Decline Since 2020 Amid Supply Glut Fears

Brent crude futures plummeted approximately 19% in 2025, marking its largest annual percentage drop since 2020. This downturn also signifies a record-breaking third consecutive year of declines. Similarly, U.S. West Texas Intermediate (WTI) saw a steep fall of nearly 20% over the course of the year.

Market Outlook and Price Forecasts

Commodity analysts at BNP Paribas project that Brent crude could drop to $55 per barrel in the first quarter of 2026. However, prices are expected to recover to around $60 per barrel for the remainder of the year as supply growth normalizes and demand remains steady.

Record Production vs. Domestic Inventory

According to the U.S. Energy Information Administration (EIA), while U.S. crude oil stocks fell last week, inventories of distillates and gasoline rose more than anticipated. Furthermore, the latest EIA data reveals that U.S. oil production hit an all-time record high in October.

Geopolitical Tensions and Policy Shifts

The market has been navigating a complex geopolitical landscape. In recent weeks, major OPEC producers—Saudi Arabia and the UAE—faced heightened tensions regarding Yemen. Simultaneously, U.S. President Donald Trump ordered a blockade on Venezuelan oil exports and threatened additional strikes against Iran.

Despite these tensions, oil prices have softened. This is largely due to OPEC+ accelerating production increases earlier this year, coupled with growing concerns that U.S. tariffs could stifle global economic growth and dampen fuel demand.

OPEC+ Strategy and Global Oversupply

OPEC+ recently decided to delay further production hikes in the first quarter of 2026, after having already reintroduced approximately 2.9 million barrels per day (bpd) into the market since April. The group's next meeting is scheduled for January 4.

Most analysts anticipate that oil supply will outpace demand next year. Estimates for the global surplus vary, with the International Energy Agency (IEA) projecting a surplus of 3.84 million bpd, while Goldman Sachs expects a more modest 2 million bpd.

Potential for Further Cuts

Morgan Stanley analysts noted that while significant price drops could trigger further production cuts from OPEC+, prices would likely need to fall substantially further from current levels—potentially below $50 per barrel—before the alliance takes additional action.