Oil prices dropped by approximately 3% in 2024, marking a second consecutive year of decline. The decrease was attributed to a stalled post-pandemic demand recovery, economic challenges in China, and increased crude output from the U.S. and other non-OPEC producers, which contributed to a well-supplied global market.
On the year’s final trading day, Brent crude futures rose 65 cents (0.88%) to settle at $74.64 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 73 cents (1.03%) to close at $71.72 per barrel. Despite these gains, Brent ended the year about 3% lower than its 2023 closing price of $77.04, while WTI remained relatively unchanged from last year’s final settlement.
In September, Brent crude fell below $70 per barrel for the first time since December 2021. Throughout the year, Brent prices generally stayed below levels seen in recent years, as the effects of the post-pandemic demand rebound and the 2022 price shocks from Russia’s invasion of Ukraine waned.
Looking ahead, oil prices are expected to hover around $70 per barrel in 2025 due to weak demand from China and rising global supplies, counterbalancing OPEC+ efforts to support the market, according to a Reuters monthly poll. Both the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) have revised down their oil demand growth forecasts for 2024 and 2025, citing a softer demand outlook in China.
The IEA anticipates an oil market surplus by 2025, even as OPEC and its allies postponed plans to increase output until April 2025 in response to falling prices.U.S. oil production increased by 259,000 barrels per day in October, reaching a record high of 13.46 million barrels per day (bpd), driven by the strongest demand levels since the pandemic, according to data from the U.S. Energy Information Administration (EIA). The EIA forecasts production to rise further to a new record of 13.52 million bpd in 2025.
Economic and Regulatory Outlook
Investors are closely monitoring the Federal Reserve’s interest rate-cut trajectory for 2025 after Fed policymakers indicated a slower pace of reductions due to persistent inflation. Lower interest rates typically boost economic growth, which, in turn, drives energy demand.
Analysts suggest oil supply could tighten in 2025 depending on President-elect Donald Trump’s policies. Trump has called for an immediate ceasefire in the Russia-Ukraine conflict and may reimpose strict sanctions on Iran. Such measures could significantly impact global oil markets.
“With the potential for tighter sanctions on Iranian oil under Trump’s administration starting next month, we anticipate a much tighter oil market in the new year,” said Phil Flynn, senior analyst at Price Futures Group. He also highlighted firming demand in India and improved Chinese manufacturing data as additional factors influencing market dynamics.
China’s manufacturing sector grew for the third consecutive month in December, albeit at a slower pace, suggesting that recent stimulus measures are supporting the world’s second-largest economy.
Geopolitical and Market Developments
Oil prices found support on Tuesday following U.S. military strikes against Houthi targets in Sanaa and Yemen’s coastal regions. The Iran-backed group, which has been attacking commercial shipping in the Red Sea, poses a threat to global oil flows as part of its solidarity with Palestinians amid the ongoing Israel-Gaza conflict.
In the U.S., crude oil inventories fell by 1.4 million barrels in the week ending December 27, according to market sources citing American Petroleum Institute (API) data. Meanwhile, gasoline inventories increased by 2.2 million barrels, and distillate stocks rose by 5.7 million barrels.
