Oil prices will fall to an average of $65 per barrel in 2025 amid an oversupply of crude and a backdrop of slowing demand as countries shift toward cleaner energies and forms of transportation, Bank of America (BAC) analysts predict.
“Oil is not going to be in short supply, so we keep more of a bearish stance on oil [in 2025],” Francisco Blanch, head of Bank of America’s global commodities and derivatives research, said during an energy outlook roundtable on Tuesday.
On Tuesday, Brent (BZ=F), the international benchmark, traded just above $73 per barrel while West Texas Intermediate (CL=F) futures hovered around $70 per barrel.
Blanch points to ample supply in the world markets that will likely prevent historically high price shocks like the one seen in 2022 after Russia invaded Ukraine. Since then, domestic production has surged to record levels, with the US currently providing roughly 20% of the world’s oil. Increasing output from Venezuela and Iran has also increased supply.
While the Organization of Petroleum Exporting Countries and its allies (OPEC+) have had output cuts in place to maintain a price floor, the oil alliance has made it clear it wants to bring back supply, a move postponed twice already.
“They don’t want to keep losing market share and there’s a clear interest by the group in recovering market share and filling that gap. I am of the view that this puts a natural ceiling on prices,” said Blanch.
Looking into 2025, Blanch sees oil production ramping up strongly across a range of countries such as Brazil, Guayana, Canada, and Argentina.
“You put all that together and there’s a fair amount of supply across the Western hemisphere entering the market. In a backdrop where demand for oil is starting to soften up,” said Blanch.
The BofA outlook points to slowing demand growth, particularly from China, the world’s largest crude importer. The Chinese economy has been struggling to recover from its housing collapse. The country has also been shifting toward electric vehicles and cleaner forms of energy.
“China’s demand growth has been slowing down for a host of reasons. We cannot count on 50% of demand growth coming from China in the future,” said Blanch.
Other Wall Street analysts also see a softening market next year and beyond.
“Our view on oil shifts from neutral to outright bearish,” wrote JPMorgan analysts in their Global Commodities 2025 Outlook on Tuesday.
The firm expects global oil demand growth to decelerate from 1.3 million barrels per day this year to 1.1 million barrels per day next year “as the last phase of the post-pandemic rebound dissipates and advancement in energy efficiency and the expansion of a decarbonized fleet gain momentum in China.”
