London, Dec 31 – Oil prices were little changed on Wednesday, but benchmarks are set to post steep annual declines in 2025 as abundant supply, OPEC+ output increases, and softer demand expectations weighed on the market.
Brent crude futures rose 11 cents to $61.44 a barrel by 0451 GMT, but are on course to fall nearly 18% for the year. This would mark the most significant annual percentage decline since 2020 and a third consecutive year of losses, the longest losing streak on record.
U.S. West Texas Intermediate crude gained 11 cents to $58.06 a barrel and is headed for an annual drop of about 19%. Average prices for both benchmarks in 2025 are the lowest since 2020, according to LSEG data.
Analysts said persistent supply growth has overwhelmed demand despite a year marked by wars, sanctions, and trade disruptions. OPEC+ has added roughly 2.9 million barrels per day to the market since April, contributing to the downward pressure on prices.
BNP Paribas commodities analyst Jason Ying said Brent could fall further in early 2026 before stabilising. He expects prices to dip to around $55 a barrel in the first quarter before recovering to about $60 for the remainder of the year as supply growth normalises and demand remains broadly flat.
“The reason we are more bearish than the market in the near term is that U.S. shale producers were able to hedge at high levels,” Ying said. “This means supply from shale producers will be more consistent and less sensitive to price movements.”
Oil markets started 2025 on a stronger footing after former U.S. President Joe Biden tightened sanctions on Russia, disrupting shipments to major buyers such as China and India. Prices were further supported by attacks on Russian energy infrastructure, disruptions to Kazakhstan’s oil exports, and a brief Iran Israel conflict in June that threatened shipping through the Strait of Hormuz.
Geopolitical risks have remained elevated, with tensions involving major producers including Saudi Arabia, the United Arab Emirates, Venezuela, and Iran. However, these risks failed to offset growing concerns about weaker global demand, particularly as higher U.S. tariffs weighed on economic growth expectations.
OPEC and its allies have paused further output increases for the first quarter of 2026. The next OPEC+ meeting is scheduled for January 4.
Most analysts expect global oil supply to exceed demand next year, with surplus estimates ranging from 2 million barrels per day to nearly 3.8 million barrels per day.
