There has been plenty of conjecture about where oil is going to go in 2025 and we would suggest that the recent climb in Brent crude oil prices above $80 per barrel reflects an intensifying mix of geopolitical uncertainty. 

The main 3 uncertainties driving oil have been the impact of the U.S. presidential election, the escalation of the Middle East tensions and anticipation surrounding the OPEC+ meeting on December 1. 

These factors are clearly shaping short-term oil price dynamics, although some uncertainties have begun to ease, namely the election and the Middle East, but they still hold sway. 

Thus let’s explore revised demand and supply projections as the industry anticipates a potential surplus in 2025 and the enactment of the Trump administrations Drill. Drill. Drill policy.

1. Middle East Tensions 

Geopolitical tensions in the Middle East have posed a notable risk to the global oil supply particularly the conflicts involving Israel and Iran and the potential disruptions it would cause to OPEC’s 5 largest producers. However, so far, oil infrastructure in the region has largely remained intact, and oil flows are expected to continue without significant interruptions. 

While exchanges between regional powers remain a potential flashpoint, there is a general consensus that the two countries have stepped back from the worst. The base case for this point is to assume stability in oil transportation routes and infrastructure. 

However, as we have seen during periods of unrest this year the consequences of a flare up for global oil prices can be considerable, underscoring the market’s sensitivity to even minor shifts in Middle Eastern stability. 

2. U.S. Presidential Election – Drill Baby Drill

The U.S. presidential election outcome has had a muted effect on oil prices – so far. This is likely due to President-elect Trump’s policies regarding the energy being ‘speculative’.

But there are several parts of his election platform that will directly and indirectly hit oil over the coming 4 years.

First as foremost – its platform was built on ‘turning the taps back on’ and ‘drill, drill, drill’. Under the current administration US shale gas and new oil exploration programs have come under higher levels of scrutiny and/or outright rejections. The new administration wants to reverse this and enhance the US’ output. This is despite consensus showing these projects may return below cost-effective rates of return if oil prices remain low and the cost of production above competitors.

Second, although President-Elect’s proposed tariff policies—ranging from 10-20 per cent on all imports, with higher rates on Chinese goods—could slow global trade, the net effect on the oil market is uncertain. 

Consensus estimates have the 10 per cent blanket tariff reducing U.S. GDP growth by 1.4 per cent annually, potentially cutting oil demand by several hundred thousand barrels per day. If enacted, this bearish influence could counterbalance any potential bullish effects on prices.

The third issue is geopolitics again – this time the possible reinstatement of the “maximum pressure” campaign on Iran that was enacted in the first Trump administration. 

If the Trump administration imposes secondary sanctions on Iranian oil buyers, Iran’s exports could drop as they did during the 2018-2019 period, when sanctions sharply curtailed oil shipments. Such a development would likely tighten global supply and drive prices higher. 

These three issues illustrate possible impacts U.S. policy could have in 2025 and illustrate how contrasting economic and geopolitical factors could sway oil prices in unpredictable ways. It again also explains why reactions in oil to Trump’s victory are still in a holding pattern. 

3. What about OPEC? 

This brings us to the third part of the oil dynamic, OPEC and its upcoming Vienna convention on December 1. 

The OPEC+ meeting presents another key variable, currently the consensus issue that member countries face – the risk of oversupply in 2025 and what to do about it. Despite Brent crude hovering above $70 per barrel, a price point that has normally seen production cut reactions, consensus has OPEC+ maintain its production targets for 2025, at least for the near term. 

We feel this is open for a significant market surprise as there is a growing minority view that OPEC+ could cut production by as much as 1.4 million barrels. With Brent prices projected to stabilise around the low $70s, how effectively OPEC+ navigates this delicate balance between production and demand remains anyone’s guess and it’s not out of the question that the bloc pulls a swift change that leads to price change shocks.

December 1 is a key risk to markets.

Where does this leave 2025?

According to world oil sites global supply and demand projections for 2025 suggest a surplus of approximately 1.3 million barrels a day, and that accounts for the recent adjustments to both demand and OPEC supply which basically offset each other. 

With this in mind and all variables remaining constant the base case for Brent is for pricing to sag through 2025 with forecasts ranging from as low as $58 a barrel to $69 a barrel

However, as we well know the variables in the oil markets are vast and are currently more unknown than at any time in the past 4 years.

For example: Non-OPEC supply growth underperformed in 2024, which is atypical; over the past 15 years, non-OPEC supply has generally exceeded expectations. With Trump sworn in in late-January will the ‘Drill, Drill, Drill policy be enacted quickly and reverse this trend?

This may prompt a supply war with OPEC, who may respond to market conditions by revising its output plans downward, which would tighten supply and support prices. 

In short its going to be complex

So consensus has an oil market under pressure in 2025 with a projected surplus that could bring Brent prices into the mid-$60s range by the year’s end. 

But that is clearly not a linear call and the global oil market faces an intricate array of challenges, and ongoing monitoring of these trends will be essential to refine forecasts and gauge the future direction of prices, something we will be watching closely.

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