Oil Forecast 2025 Part One: The Fate of Crude Supply

After back-to-back bombings and hurricanes, one can’t help but wonder what the oil market’s fate will be in 2025. I have a feeling more than a few of you will be surprised after it all plays out.

In 2022, Russia’s invasion of Ukraine drove crude oil prices well over $100 per barrel. Last year, we saw volatility explode in the Middle East after the horrific events on October 7th. This year, the Middle East powder keg ignited as all hell broke loose.

Even today as I write this, the world is waiting on bated breath for Israel’s answer to the Iranian missile attack that took place earlier this month, and each new escalation leads us deeper down a path to open warfare.

If you told me a year ago that we would get to a point where Iran’s oil infrastructure was the next likely target, I wouldn’t have believed you. Yet here we sit reading about leaked phone calls between President Biden and Israel about whether or not to go after oil and nuclear facilities within Iran.

And still, oil prices have been relatively subdued this summer.

Coincidence? Maybe not.

So let’s look at what WILL drive crude in 2025.

The Fate of Crude Supply in 2025

All the geopolitical risk can drive up the price at the drop of a hat, but following the underlying fundamentals is what will really set the tone of prices in 2025.

Unfortunately for the bulls, they may be running out of time. As you know, the fourth quarter of 2024 was expected to be extremely tight from a supply and demand standpoint.

According to the EIA’s latest Short-Term Energy Outlook, Brent crude prices are expected to average $78 per barrel, a slight decrease compared to this year, and $7 per barrel less compared to last month’s projections.

According to their estimates, U.S. oil production will average 13.5 million barrels per day, which would be a slight 2.2% year-over-year increase. Whether that output increase will materialize remains to be seen, especially given that our crude production has been flat for most of 2024. As we head into the wintery months this year, when crude prices are generally at their weakest, there are just 481 rigs drilling for oil in the United States. That’s about 20 fewer than this time last year.

If you’re betting on non-OPEC supply growth, then you’re praying that Guyana and Canada can follow through with raising output.

Meanwhile, the wildcard is still the OPEC+ alliance… and this is where you run into some issues.

Last June, OPEC+ announced it was going to reign in some of the cuts that were in place, which prompted oil prices to immediately sell-off.

Can you spot the problem?

Right now, everyone is expecting OPEC+ to start raising output in December, and then continue doing so throughout 2025. Analysts and investors alike are taking it as a given without any shred of worry.

Don’t hold your breath on that one.

I know the headlines today may be calling for OPEC+ to “open the floodgates” on its production, but that’s a bit hasty, and I have a feeling that they’re setting us up for a major disappointment.

Remember, the group recently cut its forecast for global demand growth for both this year and 2025. If China’s latest stimulus plans don’t alleviate fears of an economic slowdown there, it would give OPEC+ precisely the reason they need to keep output at reduced levels.

I’ve mentioned before that between the conflicts raging in the Middle East and OPEC+ more than willing to defend oil at $70 per barrel, non-OPEC supply is going to play a key role in 2025.

Because of that, we’ve seen Big Oil invest an exorbitant amount of cash to consolidate their position in premiere oil plays like the Permian Basin. In the first quarter, 266 deals were made at a value of over $100 billion. During Q2, another 240 deals worth nearly $70 billion were announced.

These deals WILL continue in 2025.

That alone puts a huge premium on the small, hidden gems in the U.S. oil patch.

In fact, let me show you one of those overlooked oil stocks that is still flying under Wall Street’s radar. I strongly suggest you take just a few quick minutes out of your day and check out the full details right here at no cost to you.

This is one you gotta see for yourself.