Oil prices were largely steady on Wednesday, but remain on track to post losses exceeding 15% over the course of 2025, as growing concerns over oversupply weighed on the market in a year marked by wars, higher tariffs, rising production from the OPEC+ alliance, and sanctions on Russia, Iran, and Venezuela.
Brent crude futures are down about 18%, marking their largest percentage annual decline since 2020 and putting them on course for a third consecutive yearly loss — the longest losing streak in their history. US West Texas Intermediate crude is also heading for an annual decline of around 19%.
Jason Ying, senior commodities analyst at BNP Paribas, expects Brent prices to fall to $55 per barrel in the first quarter before recovering to around $60 per barrel for the rest of 2026, as supply growth normalizes while demand remains steady.
“The reason we are more bearish on the market in the near term is that we believe US shale producers have been able to hedge at relatively high price levels,” he said.
“As a result, supply from US shale producers is likely to be more stable and less sensitive to price movements,” he added.
Data from London Stock Exchange Group (LSEG) showed that average prices in 2025 for both benchmarks were the lowest since 2020. Brent crude futures rose 9 cents to $61.42 per barrel at 10:30 GMT, while WTI traded at $58.05 per barrel, up 10 cents.
Two market sources, citing data from the American Petroleum Institute released on Tuesday, said US crude and fuel inventories rose last week. The Energy Information Administration is scheduled to release its official data later on Wednesday.
Prices cool after a strong start
Oil markets had a strong start to 2025, when former US president Joe Biden ended his term by imposing tougher sanctions on Russia, disrupting supplies to major buyers China and India.
The war in Ukraine also intensified, after Ukrainian drones damaged Russian energy infrastructure and disrupted oil exports from Kazakhstan. Meanwhile, the 12-day conflict between Iran and Israel in June threatened shipping through the Strait of Hormuz — a key route for seaborne global oil flows — pushing prices higher.
Geopolitical tensions escalated further in recent weeks amid a crisis involving major OPEC producers Saudi Arabia and the UAE over Yemen, alongside orders by US president Donald Trump to impose a blockade on Venezuelan oil exports and his threats of another strike on Iran.
However, prices later retreated after the OPEC+ alliance accelerated production increases this year, while concerns grew over the impact of US tariffs on global economic growth and fuel demand.
OPEC+
The Organization of the Petroleum Exporting Countries and its allies have paused oil production increases in the first quarter of 2026, after adding around 2.9 million barrels per day to the market since April. The next OPEC+ meeting is scheduled for January 4.
Most analysts expect supply to exceed demand next year, with estimates ranging from 3.84 million barrels per day according to the International Energy Agency, to around 2 million barrels per day based on estimates from Goldman Sachs.
Martin Rats, global oil strategist at Morgan Stanley, said: “If prices were to fall sharply, I could see some production cuts from OPEC+.”
“But prices would likely need to fall much further than current levels — perhaps into the low $50s,” he added.
“If prices remain around current levels, then after the pause in the first quarter, they are likely to continue unwinding these cuts gradually,” he said.
Meanwhile, John Driscoll, managing director at consultancy JTD Energy, said geopolitical risks are likely to continue supporting oil prices, even though fundamentals point to a supply surplus.
“Everyone says things will get weaker in 2026 and beyond,” he said, adding: “But I do not underestimate geopolitics, and the Trump factor will remain significant, because he wants to be involved in everything.”
