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The price of oil will face a significant drop in 2025, with an average projection of $65 per barrel, due to an oversupply and a decrease in demand driven by the transition to clean energy, according to analysts at Bank of America (BofA). Currently, Brent is trading at $73 per barrel, while West Texas Intermediate (WTI) is around $70.
Excess supply and OPEC+ cuts
Francisco Blanch, head of global commodities research at BofA, highlighted that the supply of crude oil in global markets will be abundant, avoiding price peaks similar to those of 2022 after the Russian invasion of Ukraine. Factors such as record US production, which accounts for 20% of global supply, along with increased production in Venezuela and Iran, have contributed to this surplus.
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Although OPEC+ maintains production cuts to stabilize prices, the cartel has expressed its intention to regain market share in the future. “This puts a natural ceiling on prices,” Blanch said.
Increased production in America
Oil production will increase significantly in countries such as Brazil, Guyana, Canada and Argentina. This increase in supply, combined with a slowdown in demand, reinforces downward price projections.
Demand in China loses strength
China, the world’s largest importer of crude oil, has seen a decline in its demand growth due to domestic economic problems, such as the collapse of the real estate sector, and its transition to electric vehicles and cleaner energy. “We cannot rely on China to drive 50% of demand growth in the future,” Blanch said.
Perspectives from other analysts
JPMorgan also shared a bearish outlook in its “Global Commodities 2025 Outlook” report, forecasting a slowdown in demand growth from 1.3 million barrels per day in 2023 to 1.1 million in 2025. According to its estimates, Brent will average $73 per barrel in 2025 and will drop to $61 in 2026.
Conclusion
With a combination of excess supply, moderation in global demand and the push towards renewable energy, the oil market faces a structural transformation that could take prices to levels not seen in recent years. This poses a scenario of opportunities and challenges for both producers and consumers.
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