Analysts are revising their oil price estimates downward, as 2025 looks to be a year of high supply and sluggish demand. The oil price has been turbulent over the last four years, crashing when Covid brought a halt to the global economy and then reaching record highs as a result of Russia’s invasion of Ukraine. The knock-on effects have included runaway inflation, increasing consumer debt and arguably, seismic political change.

While consensus is now converging around a fall in oil prices next year, the picture remains uncertain. Observers had expressed fears over a potential conflict between Israel and Iran – which abated only for the dormant Syrian Civil War to erupt spectacularly. Questions persist over whether energy companies will respond positively to the incoming Trump administration and ‘Drill, baby drill’, or if increased production is even viable. And analysts have their eyes on what some predict is an imminent slowdown in China, the world’s second-largest consumer of oil.

The price of oil is at the mercy of supply and demand, geopolitics and domestic politics. Its role at the heart of global transport, industry and production means where it goes, so goes the price of goods on our shop shelves. For investors, getting an accurate read on where oil is headed is an important benchmark not just for the commodity itself, but for a suite of economic indices, stocks and shares. In this article, we examine what the leading forecasters are saying about the price of oil in 2025 and deliver our analysis to paint as clear a picture as possible of where oil prices are headed.

Worries over oil supply glut in 2025

Analysts have expressed worry over a glut in oil supply in 2025, a poll of forty economists has revealed. An October survey of experts carried out by Reuters found Brent would average $71.61 P/B in 2025, a significant drop from previous estimates and a marked drop from 2024’s price of $82.50 P/B. Respondents cited concerns over slowing growth in China and a shift toward renewables as helping to bring the price down. John Paisie of Stratas Advisors told the outlet this fall would likely occur even with the anticipated delay in increased supply from OPEC+, which had agreed to boost its output from December.

Questions linger over whether the US will significantly increase its oil output when Donald Trump takes office in January. In his election campaign, he had set out a range of measures aimed at boosting US energy production, including tax incentives and a pledge to replenish the country’s strategic oil reserve. In recent weeks the head of Exxon Mobil has poured cold water over those ambitions, essentially branding the plans uneconomical. Speaking at the Energy Intelligence Forum conference in London last week, Exxon CEO Liam Mallon said:

“We’re not going to see anybody in ‘drill, baby, drill’ mode…”A radical change (in production) is unlikely because the vast majority if not everybody, is focused on the economics of what they’re doing.”

The Trump administration hopes to increase US oil production by three million barrels per day and will issue new drilling permits and reopen the Keystone XL pipeline to get it done. Observers are now in ‘wait and see mode’ to see whether Trump or the sceptics are proved correct. As Oilprice.com reports:

“The US is pumping more than 13 million barrels of crude a day, exceeding every other nation and up almost 45 per cent in the past decade. With a surplus looming next year, the global oil market is watching to see at what rate American explorers drill new wells.”

“Many of the biggest US operators are taking a long-term approach to production, weighing when to bring certain wells online against their overall inventory. Many have throttled their output to maximize shareholders returns (i.e. higher prices) over total production (higher volumes).”

While a November report from ING argued the price incentives for any major expansion in drilling in 2025 were not there yet, there could be longer-term benefits for the industry as a result of Trump’s laissez-faire approach:

“There is additional upside to US oil production, but we do not think it will significantly move the needle. According to the quarterly Dallas Fed Energy Survey, oil producers need US$64 P/B to profitably drill a new well, and the Kansas Fed Energy Survey shows a similar number. This compares to 2025 and 2026 forward prices of around $70 P/B and $67 P/B respectively…

“Any upside in oil production would likely also provide upside to natural gas output through associated production. A Trump presidency may also provide more certainty to the industry and provide comfort to them to invest in pipeline infrastructure, alleviating a persistent bottleneck for the US natural gas market, particularly in the Permian region. Investment in natural gas pipeline capacity also leaves the potential for stronger crude oil output.

“In addition, under Trump’s presidency, we are likely to see a lifting of Biden’s pause on LNG export project approvals. While this does not change the short to medium-term outlook for the global LNG market, it will help remove some of the longer-term uncertainty around LNG supply.”

In short, if the US government succeeds in its objectives to dramatically increase oil production, it may create a catch-22 situation wherein newly approved oil wells render themselves nonviable as a result of oversupply. But that could be good news for consumers and industries that could benefit from falling overheads and inflation.

Crude forecast slashed over China fears

Forecasts for crude oil have been slashed in anticipation of a slowdown in demand in 2025. In October the US Energy Information Administration outlook put Brent at an average of $78 P/B in 2025, citing “downward revisions to demand in China.” In their most recent November forecast, the EIA revised its forecast down again, with the Brent price falling to an average of $74 P/B in the second half of 2025. Despite worries about a slowdown in China, the EIA expects global oil consumption to rise slightly as a result of growing demand from India:

“India has emerged as the leading source of growth in global oil consumption in our forecast. Over 2024 and 2025, India accounts for 25 per cent of total oil consumption growth globally. We expect an increase of 1.0 million barrels per day (b/d) in global consumption of liquid fuels in 2024. We expect even more growth next year, with global oil consumption rising by 1.2 million b/d.”

Analysts at J.P Morgan think the oil price could go even lower, and are now projecting an average price of $73 P/B in 2025. In a note, the bank said “Our view on 2025 has remained largely unchanged over the past year: we look for a large 1.3 mbd (million barrels per day) surplus and an average Brent of $73.” It comes after J.P Morgan published a forecast in October predicting that the oil price could fall into the low $60s toward the end of next year.

Chief among factors driving expectations down are worries over China, senior economist Palo Agnolucci and research analyst Nikita Makarenko said in a blog for The World Bank. In a November article, they said:

“Global demand, projected to reach 103 million barrels per day (mb/d) in 2024, is expected to grow by about 1 mb/d in 2025—a marked slowdown from the increase of 2 mb/d in 2023. This trend reflects a longer-term deceleration, with average annual increases of 1.9 mb/d in 2010-14 and 1.4 mb/d in 2015-19.

 “The slowdown in oil consumption has been particularly stark in China, where demand declined by 0.3 mb/d in 2024Q3 compared to the same period the previous year. China’s oil consumption is being negatively impacted by weak growth in industrial production, rapid adoption of electric and hybrid vehicles, and the increasing prevalence of trucks powered by liquefied natural gas (LNG).”

Oil could drop to $40 a barrel in 2025

A November forecast turned heads when one oil price reporting agency put the price of oil as low as $30 or $40 P/B in 2025 – if OPEC + back peddles on planned cuts to output. Speaking to CNBC, Tom Kloza of OPIS, said:

“There is more fear about 2025′s oil prices than there has been since years — any year I can remember, since the Arab Spring…

“You could get down to $30 or $40 a barrel if OPEC unwound and didn’t have any kind of real agreement to rein in production. They’ve seen their market share really dwindle through the years.”

While that situation is possible – it remains unlikely – although in any case, Kloza believes the oil price isn’t headed up any time soon. In a recent interview with Fox Business, the analyst said that US oil producers will ‘maintain discipline’ and that Trump would have to grapple with energy price ‘deflation’:

“The problem is we are going to have another few hundred thousand barrels a day from the Gulf of Mexico over the next couple of years and you have OPEC + with a capacity of over six million barrels a day in their pockets right now. I think we are close to probably the limit for our production.”

How will sanctions impact the oil price?

As well as market forces, oil producers can be impacted by sanctions. With Donald Trump set to take power in the US, the exact impact of any potential sanctions, and who will be targeted by them, remains unclear. The President-Elect has expressed his intention to mend relations with Saudia Arabia and seek détente with Russia. On the other hand, a Trump presidency could mean intensified sanctions aimed at Iran and Venezuela.

In a recent report by AGSIW, visiting fellow Tim Callen said OPEC + would be ‘well placed’ to step in and pick up any lull in oil supply resulting from renewed sanctions on Iran, writing:

“In the absence of sanctions on Iran, the scope for other OPEC+ members to increase oil production in 2025 is likely to be limited. Iranian sanctions would change the equation, creating the scope for production increases.”

Trump is also thought to be mulling over hitting Iraq with fresh sanctions. Analysts at S&P Global say China and India would be the hardest hit in such circumstances, citing Commodity Insights Analysis which shows more than 70 per cent of licensed oil and gas development projects in Iraq are controlled by Chinese companies.

Will the price of oil fall in 2025?

Analysts broadly anticipate a decline in prices, with Brent crude projected to average between $71 and $78 P/B according to leading forecasters. This outlook is driven by factors such as a potential surplus in supply, a cooling of China’s oil demand, and the global shift toward renewable energy sources. However, the range of predictions—from as low as $40 per barrel to conservative estimates near $70—underscores the uncertainty in the equation.

The incoming Trump administration’s energy policies aim to bolster U.S. production through new drilling permits and infrastructure projects. Whether these initiatives lead to production increases or energy companies consider increased drilling to be unviable remains to be seen. A measured approach by producers prioritising shareholder returns over sheer output may temper the impact of expanded drilling efforts.

For consumers and industries, lower oil prices could provide relief through reduced costs, easing inflationary pressures. However, for producers and investors, navigating this volatile environment will require careful consideration of market trends and policy shifts. Analysts agree the oil price will fall in 2025, but producers are likely to act in such a way as to limit that decline to ensure their operations remain profitable.