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Informist, Wednesday, Jan. 8, 2025

MUMBAI – Crude oil prices are likely to fall this year due to concern about demand and expectations of surplus supply. The oil market is expected to remain in a surplus of over 500,000 barrels per day in 2025 despite delay in increasing production by some members of the Organization of the Petroleum Exporting Countries and its allies, ICICI Direct said in its yearly outlook. Most of the growth in oil production this year will be accounted for by non-OPEC countries.

Eight members of OPEC and its allies extended their voluntary production cuts of crude oil till the end of March. The cartel plans to increase supply at a slower pace, taking 18 months to return to full supply.

China's crude oil demand is likely to fall this year as the country's real estate and construction sector downturn continues to be a drag on the economy. Additionally, a potential trade war during US president-elect Donald Trump's second term could have a negative effect on economic growth, hurting demand for the commodity, it said.

The only upside trigger to prices would be disruption of oil flow through the Strait of Hormuz. There is a high possibility that Trump would enforce oil sanctions on Iran. If Iran retaliates and blocks the Strait of Hormuz, there might be a major supply disruption as Persian Gulf supply is through this route.

However, OPEC and allies are sitting on sizeable spare production capacity, which could protect the market in the event of any disruption to supplies, the report said.

Oil production in the US is expected to rise due to Trump's oil-friendly policies, according to the report. Global oil inventories are expected to fall by 700,000 barrels per day in the first quarter of 2025 due to extension of production cuts by OPEC and its allies, the report said, citing the US Energy Information Administration. However, a ramp-up in production by OPEC and its allies and continued supply growth outside the cartel would lead to average inventory build-up of 100,000 barrels per day over the remainder of 2025, it said.

ICICI Direct expects West Texas Intermediate crude on the New York Mercantile Exchange to trade in a range of $60-$85 per barrel this year. At 1333 IST, the most-active February crude oil contract on the NYMEX was up 0.6% at $74.69 per barrel.  End

US$1 = INR 85.85

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Ashutosh Pati

Edited by Avishek Dutta

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