Khaberni - Oil prices fell today, Wednesday, heading to record a decline exceeding 15% in 2025 after supply exceeded demand in a year marked by wars, increased tariffs, rises in OPEC+ production, and sanctions on Russia, Iran, and Venezuela.
Brent crude futures fell nearly 18%, marking the largest annual decline since 2020, and heading for a third consecutive year of losses, the longest losing streak ever.
The March contract, which expires today Wednesday, dropped five cents to $61.28 per barrel by 11:37 Abu Dhabi time.
Jason Ying, a commodities analyst at BNP Paribas, expects Brent to drop to $55 per barrel in the first quarter of 2026 before recovering to $60 for the rest of the year, as supply growth is expected to normalize while demand remains steady.
He said: "We believe that U.S. shale oil producers have managed to hedge at elevated levels... Thus, the supply from shale oil producers will not be severely affected by price movements."
West Texas Intermediate crude dropped three cents to $57.92 per barrel but is heading for a 19% annual decline.
London Stock Exchange Group data shows that the average prices for 2025 for both benchmark crudes are the lowest since 2020.
Oil markets had a strong start to 2025 when former U.S. President Joe Biden ended his term by imposing tougher sanctions on Russia, disrupting supplies to China and India, the biggest buyers of Russian crude.
The war in Ukraine intensified when drones launched by Kyiv damaged Russia's energy infrastructure and disrupted Kazakhstan's oil exports, and the 12-day conflict between Iran and Israel in June threatened shipping through the Strait of Hormuz, raising oil prices.
Geopolitical tensions rose amid a dispute between Saudi Arabia and the UAE, major producers in the Organization of the Petroleum Exporting Countries (OPEC), over Yemen, and President Donald Trump's order to impose a blockade on Venezuelan oil exports and his threat to strike Iran again.
However, prices fell after the OPEC+ alliance, which includes OPEC and its allies, accelerated its production increase this year, with growing concerns about the impact of U.S. tariffs on global economic growth and fuel demand.
The alliance decided to suspend oil production increases in the first quarter of 2026 after pumping about 2.9 million barrels per day into the market since April. The next OPEC+ meeting will be held on January 4th.
Most analysts expect supply to exceed demand next year, with a gap ranging between 3.84 million barrels per day according to the International Energy Agency estimates, and two million barrels per day according to Goldman Sachs estimates.
Martijn Rats, an analyst at Morgan Stanley, said: "If the price really drops significantly, I imagine we will see some cuts (from OPEC+)... but perhaps the price needs to drop further from now on - maybe to around $50."
