Jan 1 2025: In 2024, oil prices recorded a 3% annual decline, marking the second consecutive year of losses as global demand recovery slowed, China’s economic challenges persisted, and increased crude output from the U.S. and non-OPEC producers contributed to a surplus in the global market.
On the final trading day of the year, Brent crude futures rose by 65 cents (0.88%) to settle at $74.64 per barrel, while U.S. West Texas Intermediate (WTI) crude climbed 73 cents (1.03%) to $71.72 per barrel. Despite these gains, Brent closed the year approximately 3% lower than its 2023 final settlement of $77.04, with WTI remaining largely unchanged.
Brent futures dipped below $70 per barrel in September for the first time since December 2021, reflecting reduced demand growth after the pandemic and diminishing impacts from the 2022 geopolitical disruptions caused by Russia’s invasion of Ukraine. Analysts project oil prices to average around $70 per barrel in 2025, with weak Chinese demand and growing global supply offsetting efforts by OPEC+ to stabilize prices.
China’s sluggish demand prompted the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) to lower their demand growth forecasts for 2024 and 2025. The IEA expects the market to face a surplus in 2025, even as OPEC+ delays plans to increase production until April.
U.S. crude production reached a record high of 13.46 million barrels per day (bpd) in October, with projections indicating a further rise to 13.52 million bpd in 2025, according to the Energy Information Administration (EIA).
Economic and Regulatory Outlook
The Federal Reserve’s interest rate policies for 2025 remain a key focus, as reduced rates could drive economic growth and fuel energy demand.
President-elect Donald Trump’s potential policies, including stricter sanctions on Iran and efforts to mediate the Russia-Ukraine conflict, may significantly impact oil markets. Analysts believe these factors, along with strengthening demand in India and recent positive manufacturing data from China, could tighten the market in the coming year.
China’s manufacturing sector saw its activity expand for the third consecutive month in December, though the growth pace slowed. The economy continues to benefit from fresh stimulus initiatives aimed at supporting its recovery.
Oil prices also received support from U.S. military strikes on Houthi militants in Yemen, aimed at protecting Red Sea commercial shipping routes. These actions underscore ongoing risks to global oil supplies.
Additionally, U.S. crude inventories decreased by 1.4 million barrels in the week ending December 27, while gasoline and distillate stocks rose by 2.2 million and 5.7 million barrels, respectively, according to data from the American Petroleum Institute.
