International crude oil prices fell around three per cent in 2024, slipping for a second straight year, as the post-pandemic demand recovery stalled, China’s economy struggled, and the US and other producers pumped more crude into a well-supplied global market. Oil prices will likely be constrained near $70 in 2025 amid weak demand from importers and rising global supply.
In 2024, the crude oil and natural gas market navigated a complex landscape of controlled supply and variable demand, heightened geopolitical tensions, macroeconomic weakness, and a continued focus on energy transition. The resilience was reflected in the stability and consolidation of crude oil prices.
Brent crude prices 2024 review
Brent prices logged its second straight annual decline. According to Deloitte, Brent crude oil prices exhibited a minimal average monthly change and a monthly range-bound movement between $74 and $90 per barrel in 2024, making 2024 one of the most stable years in the past 25 years.
On Tuesday, the last trading day of the year, Brent crude futures settled up 65 cents, or 0.88 per cent, to $74.64 a barrel. US West Texas Intermediate crude settled up 73 cents, or 1.03 per cent, to $71.72 a barrel. The Brent benchmark settled down around three per cent from its final 2023 closing price of $77.04, while WTI was roughly flat with last year’s final settlement.
In September 2024, Brent crude futures closed below $70 a barrel for the first time since December 2021. In 2024, the oil benchmark broadly traded under highs seen in the past few years as the post-pandemic demand rebound and commodity price shocks of Russia’s 2022 invasion of Ukraine began to fade.
Brent crude outlook for 2025
Oil will likely trade around $70 a barrel in 2025 on weak Chinese demand and rising global supplies, offsetting efforts led by the Organization of Petroleum Exporting Countries and its allies (OPEC+) to shore up the oil market. The global benchmark Brent crude has averaged around $80 a barrel in 2024.
Analysts project oil prices to hover between $70-$80 in 2025, with a potential uplift of $10 if geopolitical tensions escalate. According to Reuters, Brent crude will likely average $74.33 per barrel in 2025, down from a forecast of $74.53 in November, marking an eighth straight downward revision. US crude is projected to average $70.86 in 2025, compared to last month’s expectation of $70.69.
OPEC+, which pumps about half the world’s oil, at its December 2024 meeting pushed back the start of oil output rises by three months until April 2025 and extended the full unwinding of supply cuts by a year until the end of 2026.
Analysts from JPMorgan predict that supply will outpace demand by 1.2 million barrels per day (bpd). Leading global investment bankers Morgan Stanley and HSBC also revised down their expectations for an oil market surplus next year. It forecast a Brent crude price of $70 per barrel, following OPEC’s decision to delay and slow plans for a higher crude output.
The decision came after crude prices weakened 18 per cent since June due to an oversupply and low war-related risk premium. Morgan Stanley raised its Brent forecast for the second half of 2025 to $70 from $66-68. The bank lowered its estimate for OPEC-9 (OPEC members minus Iran, Libya, and Venezuela, who are exempted from output curbs) production by 400,000 bpd for 2025 and by 700,000 bpd by the fourth quarter of next year.
It also cut its estimate for Iran’s production by about 100,000 bpd through 2025. “In aggregate, this reduces our estimated surplus in 2025 from 1.3 to 0.8 million bpd in our total liquids balance, and from 0.7 to 0.3 million bpd in our crude-only balance,” said Morgan Stanley in its note on Thursday, December 5.
On the other hand, HSBC maintained its Brent crude price forecast at $70 per barrel for 2025 and beyond, it said in a note on Friday. The bank anticipates an oil market surplus of 0.2 million barrels per day in 2025 if OPEC proceeds with planned production hikes in April. Previously, it had expected a surplus of 0.5 million bpd.
Bank of America (BoFA) expects Brent oil prices to average $65 per barrel, assuming no significant increase in OPEC production volumes in 2025. “Demand growth has slowed this year and is expected to remain tepid in 2025 too, tipping the market into surplus next year,” said BoFA. The weak demand outlook is the Achilles’ heel for OPEC, the bank said, and forecast global oil demand growth averaging one million bpd this year and 1.1 million bpd next.
Investors will be watching the US Federal Reserve’s interest rate-cut outlook for 2025 after US Fed bank policymakers projected a slower path in its December policy meeting due to stubbornly high inflation. Lower interest rates generally spur economic growth, which feeds energy and oil demand.
-US oil production rose 259,000 barrels per day to a record high of 13.46 million bpd in October, as demand surged to the strongest levels since the pandemic, data from the US Energy Information Administration (EIA) showed on Tuesday. Output is set to rise to a new record of 13.52 million bpd next year.
-Some analysts still believe supply could tighten next year depending on US President-elect Donald Trump’s policies, including those on sanctions. He has called for an immediate ceasefire in the Russia-Ukraine war, and he could re-impose a so-called maximum pressure policy toward Iran, which could have major implications for oil markets.
-China’s manufacturing activity expanded for a third-straight month in December, though at a slower pace, suggesting a blitz of fresh stimulus is helping to support the world’s second-largest economy. Analysts still see a much tighter oil market going into new year over Iran oil sanctions.
-Buoying prices on Tuesday, the US military said it carried out strikes against Houthi targets in Sanaa and coastal locations in Yemen. The Iran-backed militant group has been attacking commercial shipping in the Red Sea for more than a year in solidarity with Palestinians amid Israel’s year-long war in Gaza, threatening global oil flows.
“We expect crude oil prices to remain volatile. Crude oil has support at $70.75-70.10, and resistance is at $72.00-72.50. In INR crude oil has support at ₹6,040-5,970 while resistance at ₹6,170-6,240. Traders are now waiting for US factory survey data to provide more insight into the demand outlook,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
According to Kalantri, the market is now bracing for a potentially turbulent year ahead. Concerns about a supply glut, geopolitical risks, and the impact of the incoming Trump administration on oil policy are all adding to the caution.
Source: Livemint
