Oil prices crept higher on Wednesday while heading for a fall of more than 15% over the course of 2025, as expectations of oversupply increased in a year marked by wars, higher tariffs, increased OPEC+ output and sanctions on Russia, Iran and Venezuela.

Brent crude futures, down over 17% – the most substantial annual percentage decline since 2020 – are on track for a third straight year of losses, their longest losing streak to date. U.S. West Texas Intermediate crude headed for a near 19% annual decline.

BNP Paribas commodities analyst Jason Ying anticipates Brent will dip to $55 a barrel in the first quarter before recovering to $60 a barrel for the rest of 2026 as supply growth normalizes and demand stays flat.

“The reason why we’re more bearish than the market in the near term is that we think that U.S. shale producers were able to hedge at high levels,” he said.

“So the supply from shale producers will be more consistent and insensitive to price movements.”

Brent and US Crude Rise Slightly on Wednesday

Brent futures were up 28 cents, or 0.46%, at $61.61 a barrel by 1417 GMT, while U.S. West Texas Intermediate crude was at $58.23, up 28 cents, or 0.48%. The 2025 average prices for both benchmarks are the lowest since 2020, LSEG data showed.

U.S. crude and fuel inventories rose last week, market sources said, citing American Petroleum Institute figures on Tuesday. The U.S. Energy Information Administration will release its data later on Wednesday. [EIA/S]

Oil markets had a strong start to 2025 when former President Joe Biden ended his term by imposing tougher sanctions on Russia, disrupting supplies to major buyers China and India.

The impact of the war in Ukraine on energy markets intensified when Ukrainian drones damaged Russian infrastructure and disrupted Kazakhstan’s oil exports.

The 12-day Iran-Israel conflict in June added to the threats to supply by disrupting shipping in the Strait of Hormuz, a major route for global seaborne oil, which fanned oil prices.

In recent weeks, OPEC’s biggest producers Saudi Arabia and the United Arab Emirates have become locked in a crisis over Yemen, and U.S. President Donald Trump has ordered a blockade on Venezuelan oil exports and threatened another strike on Iran.

OPEC+ Accelerated Output Increases

But prices eased after OPEC+ accelerated its output increases this year and as concerns about the impact of U.S. tariffs weighed on global economic and fuel demand growth.

OPEC+, which groups the Organization of the Petroleum Exporting Countries and its allies, has paused oil output hikes for the first quarter of 2026 after releasing some 2.9 million barrels per day into the market since April. The next OPEC+ meeting is on January 4.

Most analysts expect supply to exceed demand next year, with estimates ranging from the International Energy Agency’s 3.84 million barrels per day to Goldman Sachs’ 2 million bpd.

“If the price really has a substantial fall, I would imagine you will see some cuts (from OPEC+),” said Martijn Rats, Morgan Stanley’s global oil strategist. “But it probably does need to fall quite a bit further from here on – maybe in the low $50s.”

“If today’s price simply prevails, after the pause in Q1, they’ll probably continue to unwind these cuts.”

John Driscoll, managing director of consultancy JTD Energy, expects geopolitical risks to support oil prices even though market fundamentals point to oversupply.

“Everybody’s saying it’ll get weaker into 2026 and even beyond,” he said. “But I wouldn’t ignore the geopolitics, and the Trump factor is going to be playing out because he wants to be involved in everything.”

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(Reporting by Florence Tan in Singapore, Enes Tunagur in London; Additional reporting by Seher Dareen and Robert Harvey in London; Editing by Frances Kerry, Barbara Lewis and Jan Harvey)