Oil prices will fall to an average of $65 per barrel by 2025, amid an oversupply of crude oil and a backdrop of declining demand as countries transition to cleaner energy and modes of transportation, Bank of America (BAC) analysts predict.
“There will be no shortage of oil, so we remain more bearish on oil [in 2025]Francisco Blanch, head of Bank of America’s global commodities and derivatives research, said Tuesday during a roundtable on the energy outlook.
On Tuesday, Brent (BZ=F), the international benchmark, was trading just above $73 per barrel, while West Texas Intermediate (CL=F) futures were hovering around $70 per barrel.
Blanch points to ample supply on global markets that will likely prevent historically high price shocks like the one in 2022 after Russia invaded Ukraine. Since then, domestic production has risen to record levels, with the US currently supplying around 20% of the world’s oil. Increasing production from Venezuela and Iran has also increased supply.
While the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have implemented production cuts to maintain a price floor, the oil alliance has made clear it wants to reduce supply, a move that has already been postponed twice.
“They don’t want to keep losing market share and there is clearly an interest within the group in regaining market share and filling that gap. I believe this puts a natural ceiling on prices,” Blanch said.
Looking to 2025, Blanch sees oil production increasing sharply in a range of countries such as Brazil, Guayana, Canada and Argentina.
“If you put all that together, there’s a fair amount of supply coming into the market in the Western Hemisphere, in a context where oil demand is starting to weaken,” Blanch said.
BofA’s outlook points to slowing demand growth, especially from China, the world’s largest crude oil importer. The Chinese economy is struggling to recover from the housing crisis. The country has also transitioned to electric vehicles and cleaner forms of energy.
“China’s demand growth is slowing for many reasons. We cannot count on 50% of demand growth coming from China in the future,” Blanch said.
Other Wall Street analysts also see a weakening in the market next year and beyond.
“Our view on oil is shifting from neutral to downright bearish,” JPMorgan analysts wrote in their Global Commodities 2025 Outlook on Tuesday.
The company expects global oil demand growth to slow from 1.3 million barrels per day this year to 1.1 million barrels per day next year “as the final phase of the post-pandemic recovery fades and progress on energy efficiency and the expansion of a carbon-free fleet is increasing.” momentum in China.”
