If OPEC+ fully unwinds its current production cuts, oil prices could plunge to $40 per barrel in 2025, according to analysts. Many market watchers see a challenging year ahead for oil, especially if OPEC+ increases production without a balanced supply-demand recovery, potentially sparking a price war for market share.
Threat of Oversupply
Tom Kloza, global head of energy analysis at OPIS, stated that the risk of oil price declines in 2025 is higher than any year in recent memory. He predicts that if OPEC+ abandons its production controls, oil prices could fall to $30 or $40 per barrel. Currently, global benchmark Brent crude is trading at around $72 per barrel, with U.S. West Texas Intermediate (WTI) at approximately $68 per barrel.
Citibank energy strategist Martoccia Francesco anticipates that even with a gradual easing of OPEC+ production cuts, market oversupply could increase significantly, potentially doubling the current surplus to 1.6 million barrels per day. He added that the consensus for 2025 is a “substantial” buildup in oil inventories, which would put further pressure on prices.
The Future of OPEC+ Production Strategy
To support oil prices, OPEC+ has repeatedly extended its voluntary output cuts. For example, in September, the group extended the 2.2 million barrels per day (bpd) production cut, originally set to end that month, by an additional two months. Analysts believe OPEC+ is more likely to gradually relax production cuts rather than release all withheld supply at once, which would prevent a sudden price drop.
Despite these efforts, sluggish demand recovery, especially from China, as well as increased production plans from non-OPEC countries like the U.S., Canada, and Brazil, will likely continue to put pressure on the market.
Political Factors Influencing the Oil Market
Trump’s re-election could also weigh on oil prices. Analysts point out that Trump’s potential “drill baby drill” policy could encourage U.S. oil production, putting additional downward pressure on energy prices. If he pursues aggressive trade policies, including a trade war with China, it could impact the global economy and further depress oil demand.
Kpler’s lead oil analyst, Matt Smith, suggested that for Trump’s promise to cut energy prices in half to be realized, oil would need to drop below $40 per barrel. Currently, U.S. retail gasoline prices sit at around $3 per gallon—a “sweet spot” for consumers and producers alike.
Summary
With growing concerns over OPEC+ production policy and slowing global demand, oil prices may face continued pressure in the coming year. Investors in forex and energy markets should monitor OPEC+ policy adjustments and the U.S. administration’s energy stance closely to anticipate potential market volatility.
