Embrace Oil Back to $50 Era in 2025: Wall Street Consensus on Pessimistic Energy Outlook

Wall Street remains unanimously pessimistic about the oil market in 2025, as future oil oversupply will be a critical factor in driving continued weakness in oil prices.

"Demand is not the primary concern as global oil demand growth is expected to slow from 1.3 million barrels per day this year to 1.1 mbd next year ... Instead, the real challenge lies in the excess supply," Natasha Kaneva, head of the Global Commodities Strategy team at JPMorgan, wrote in a recent note.

Kaneva and her team predict that the international benchmark Brent crude will fall to an average of $73 per barrel in 2025. By comparison, the average price of Brent crude in 2024 is around $80.

Meanwhile, Bank of America's analysis shows that oil prices could fall to an average of $65 per barrel by 2025, especially as OPEC, which has repeatedly delayed production increase plans this year, may decide to gradually increase production in 2025, bringing more oil back to the market.

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 earlier this month.

Analysts noted that large offshore development projects in Brazil, Guyana, Senegal, and Norway will bring significant supply.

Additionally, the supply of crude oil from the United States may also increase with the inauguration of President-elect Trump. Currently, the U.S. provides about 20% of the world's oil, more than any other country.

In a recent speech, Trump stated his intention to lower energy prices by relaxing regulations once in office. "We'll soon unleash American energy. And this will be done at levels not seen before, issuing quick approvals for pipelines, drilling, and other infrastructure," he said.

Wall Street analysts pointed out that the continuously growing supply might suppress any upward shocks in prices.

"There's a much much larger risk of a big price drop to $50 or $60 than there is to something like the $80+ range, Tom Kloza, OPIS global head of energy analysis said. It would take something on the order of the Russian invasion of Ukraine or a wider mid-Eastern war to really send prices back up to the 2022 or 2023 highs."

Although some analysts indicated that if Trump imposes sanctions on Iran or Venezuela, oil futures might rise, JPMorgan's Kaneva still believes that the incoming president will ultimately maintain low oil prices to avoid triggering inflation.

Any policies that might raise oil price will likely take a backseat to Trump's key objective of maintaining low energy prices, she wrote in the report.