Despite Daily Gains, Oil Prices End Year with Losses On 2025’s Uncertainties

Oil prices concluded 2024 with a second consecutive year of losses, despite a modest increase on Tuesday. While Brent crude futures and US West Texas Intermediate (WTI) crude saw slight gains, they remain below their year-end 2023 levels, indicating a subdued market.

The subdued price environment reflects a confluence of factors. Weakening demand from China, the world’s largest oil importer, is a significant concern. Furthermore, rising global oil supply, driven by increased production from non-OPEC sources, is expected to exert downward pressure on prices. Despite efforts by OPEC+ to stabilize the market, including production cuts, these headwinds are expected to persist in 2025.

Analysts anticipate that oil prices will remain constrained near the $70 per barrel level throughout the year. The International Energy Agency (IEA) predicts a surplus in the oil market in 2025, even with continued production cuts by OPEC+.
The outlook for 2025 is further complicated by several uncertainties. The Federal Reserve’s monetary policy stance will play a crucial role. While the central bank has recently signaled a slower path for interest rate cuts, lower interest rates generally stimulate economic growth and, consequently, oil demand.

The incoming Trump administration’s policies will also have a significant impact on the oil market. Potential policy shifts, including changes in trade policy, tax cuts, and immigration regulations, could have unforeseen consequences for the global economy and oil demand.

Additionally, the potential impact of geopolitical shifts, such as a potential ceasefire in the Russia-Ukraine war and changes in US policy towards Iran, remain significant uncertainties.
While data showing an expansion in Chinese manufacturing activity provided some support for oil prices, this was offset by the potential for increased oil production from Nigeria.