The U.S. Energy Information Administration has revealed that global oil supplies exceeded demand in 2025, leading to a sharp decline in oil prices. Monthly average Brent crude oil prices declined from $79 per barrel in January to $63 per barrel in December, the lowest monthly average price since early 2021. Meanwhile, oil prices averaged $69 per barrel in 2025, the lowest in five years even after adjusting for inflation.
Oil markets responded to a raft of (mostly) negative catalysts throughout the year. Oil prices fell in the first half of the year due to slowing economic activity taking a toll on global oil demand. Prices fell nearly $15 per barrel in April amid escalating tariffs and fears of retaliatory levies by the largest economies.
OPEC+ announcements hit oil markets in the second half of the year with fears that unwinding their production cuts could lead to oversupplied markets. In its latest Short-Term Energy Outlook, EIA estimates that global petroleum inventories build sharply in the second half of 2025, with implied stock builds approaching around 2 million barrels per day at times as production of crude oil and liquid fuels continues to outpace consumption.
For 2026, EIA has projected average Brent crude price at $55.08 per barrel and WTI at $51.42 per barrel, cutting from its previous forecast of $54.92 and $51.26 per barrel, respectively. Similar to the previous year, the market is expected to face a significant and persistent supply surplus throughout 2026.
This glut will be driven by a combination of resilient output from non-OPEC+ producers (including the U.S., Brazil, Guyana, and Canada) as well as the unwinding of voluntary production cuts by some OPEC+ members.
U.S. oil output has remained resilient, contributing a steady flow of supply to the market despite prices hovering near some producers’ break-even levels. Meanwhile, global oil demand growth has slowed, especially in major economies like China and Europe. Factors contributing to this include the increasing adoption of electric and hybrid vehicles, energy efficiency gains and general sluggish global economic growth.
By Alex Kimani for Oilprice.com
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