Published by Global Banking and Finance Review
Posted on December 31, 2025
By Florence Tan
SINGAPORE, Dec 31 (Reuters) - Oil prices were little changed on Wednesday but are set to fall more than 15% for 2025, as supply outpaced demand in a year marked by wars, higher tariffs and OPEC+ output and sanctions on Russia, Iran and Venezuela.
Brent crude futures, down nearly 18% - the most substantial annual percentage decline since 2020 - are on track for a third straight year of losses, their longest-ever losing streak. The March contract, which expires on Wednesday, rose 11 cents to $61.44 a barrel at 0451 GMT.
BNP Paribas commodities analyst Jason Ying expects Brent to dip to $55 a barrel in the first quarter before recovering to $60 a barrel for the rest of 2026 as supply growth is expected to normalise while demand stays flat.
"The reason why we're more bearish than the market in the near term is that we think that U.S. shale producers were able to hedge at high levels," he said.
"So the supply from shale producers will be more consistent and insensitive to price movements."
U.S. West Texas Intermediate crude was at $58.06, up 11 cents, and was headed for a 19% annual decline. The 2025 average prices for both benchmarks are the lowest since 2020, LSEG data showed.
Oil markets had a strong start to 2025 when former President Joe Biden ended his term by imposing tougher sanctions on Russia, disrupting supplies to top buyers China and India.
The war in Ukraine intensified when Ukrainian drones damaged Russian energy infrastructure and disrupted Kazakhstan's oil exports and the 12-day Iran-Israel conflict in June threatened shipping in the Strait of Hormuz, a key oil chokepoint, which fanned oil prices.
Adding to geopolitical tensions, top OPEC producers Saudi Arabia and the United Arab Emirates are engaged in a conflict over Yemen and U.S. President Donald Trump has ordered a blockade on Venezuelan oil exports and threatened another strike on Iran.
But prices cooled after OPEC+ accelerated its output increases this year and as concerns about the impact of U.S. tariffs weighed on global economic and fuel demand growth.
OPEC+
The Organization of the Petroleum Exporting Countries and its allies have paused oil output hikes for the first quarter of 2026 after releasing some 2.9 million barrels per day into the market since April. The next OPEC+ meeting is on January 4.
Most analysts expect supply to exceed demand next year, with estimates ranging from the International Energy Agency's 3.84 million barrels per day to Goldman Sachs' 2 million bpd.
"If the price really has a substantial fall, I would imagine you will see some cuts (from OPEC+)," said Martijn Rats, Morgan Stanley's global oil strategist. "But it probably does need to fall quite a bit further from here on - maybe in the low $50s."
"If today's price simply prevails, after the pause in Q1, they’ll probably continue to unwind these cuts."
John Driscoll, managing director of consultancy JTD Energy, expects geopolitical risks to support oil prices despite fundamentals pointing to an oversupply.
"Everybody's saying it'll get weaker into 2026 and even beyond," he said. "But I wouldn't ignore the geopolitics and the Trump factor is going to be playing out because he wants to be involved in everything."
"We are living in a powder keg and I think that is kind of your ultimate floor," he added.
(Reporting by Florence Tan; Additional reporting by Seher Dareen in London; Editing by Thomas Derpinghaus)
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