Financial market analysis: Oil price outlook

Oil price outlook: Stability with a downward bias 

Brent crude prices have extended their decline in March and may stay under pressure in the near future. Several factors are contributing to this trend, including new U.S. tariffs detracting from GDP growth expectations, the suspension of U.S. military aid to Ukraine, signalling easing tensions between the US and Russia, and OPEC+ reaffirming its plans to increase production after April. Looking ahead, Brent prices are forecasted to decline by around 6% in 2025, as supply growth outpaces demand.

Slower global growth, weaker demand

The world economy is expected to cool down, especially in major economies like the US and China. Due to the effects of Trump's policies, market attention has shifted from inflation concerns to US recession fears. US President Trump’s policy upheavals have raised levels of uncertainty due to a lack of trade policy clarity, which has undermined both consumer and business confidence.

China continues to battle its own economic growth concerns, which are compounded by Trump’s tariffs and potential retaliation measures. Although China’s stimulus efforts might help boost demand slightly, overall growth is projected to be modest compared to historical levels. Meanwhile, advanced economies continue to push for green energy solutions further keeping oil demand in check. This sluggish demand suggests downward pressure on prices. 

Overall, global oil consumption forecasts range from 1 to 1.5 million barrels per day (bpd) in 2025 on the back of consumption estimated at 103 million bpd in 2024.

Strong supply could keep prices in check

On the supply side, global oil production remains high. Non-OPEC+ countries—including the U.S., Brazil, and Guyana—are increasing output, with an expected growth of 1.5 million bpd in 2025. OPEC+ members have committed to gradually increasing crude oil production beginning in April 2025. Eight countries in OPEC+ will start rolling back their voluntary output cuts of 2.2 million bpd over an 18-month period, extending through September 2026. The supply glut could widen, pushing prices down. Global supply is already outpacing demand by about 600,000 bpd according to the International Energy Agency, which could lead to higher inventories and further price softness. 

The wild card: geopolitical risks

Geopolitical factors add uncertainty. Tensions in the Middle East or new sanctions on oil producers like Iran or Venezuela could temporarily drive prices up. There are concerns about tighter global supplies should the US follow through on tariff threats on buyers of Venezuelan oil. Already some countries have halted Venezuelan oil imports. However, global inventories are strong—China is estimated to hold up between 1.1 and 1.5 billion barrels—and OPEC has spare capacity of around 5 million bpd, according to the International Energy Agency, providing a cushion against major supply shocks. Trade tensions, especially potential U.S. tariffs on China or broader policy shifts under the Trump presidency, could also impact demand, though their immediate effect in the short term is uncertain. Finally, amid signals that the US is thawing relations with Russia, reduced geopolitical risk and Russian oil supplies into the market could exert downward pressure on oil prices. Unless demand rises significantly, an oversupplied market will keep prices from rebounding in the near term

Overall, in the short term, oil prices may hover between $70 and $75 per barrel, with a slight downward bias if the global economic slowdown deepens and supply remains ample. The interplay of economic data, OPEC+ decisions, and unexpected events will be critical to watch.

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