USA EIA Lowers 2025 Oil Price Forecast

The U.S. Energy Information Administration (EIA) lowered its Brent spot average price forecast for next year in its latest short term energy outlook (STEO), which was released this week.

According to its November STEO, the EIA now sees the Brent spot price averaging $76.06 per barrel in 2025. In its previous October STEO, the EIA forecast that the Brent spot price would average $77.59 per barrel next year.

A quarterly breakdown included in the EIA’s latest STEO showed that the organization expects the Brent spot price to come in at $78 per barrel in the first quarter of 2025, $77.67 per barrel in the second quarter, $75.67 per barrel in the third quarter, and $73.02 per barrel in the fourth quarter.

In its previous STEO, the EIA projected that the Brent spot price would average $78 per barrel in the first quarter of next year, $79 per barrel in the second quarter, $77.67 per barrel in the third quarter, and $75.72 per barrel in the fourth quarter.

The EIA’s November STEO sees the Brent spot price averaging $80.95 per barrel this year. Its October STEO projected that the commodity would come in at $80.89 per barrel in 2024. Both STEOs put the 2023 Brent spot price average at $82.41 per barrel.

In its latest STEO, the EIA highlighted that the Brent crude oil spot price averaged $76 per barrel last month. The organization pointed out that this was up $2 per barrel from the average in September.

“Crude oil prices increased in October in part because of market concerns that an Israeli response to Iran’s missile attack on October 1 would reduce Iran’s ability to produce or market oil,” the EIA noted in its November STEO.

“However, Brent fell to $71 per barrel on October 29 after Israel’s military response did not target Iran’s oil infrastructure,” it added.

“Despite the drop in oil prices in late October, we still expect that ongoing withdrawals from global oil inventories stemming from OPEC+ production cuts, along with potential for further geopolitical risk, will put upward pressure on oil prices through the first quarter of 2025,” the EIA went on to state.

In its latest STEO, the EIA estimated that global oil inventories fell by 0.9 million barrels per day in the third quarter. It projected that these will drop by an average of 0.3 million barrels per day in the fourth quarter of this year and first quarter of 2025.  

“As a result, we expect the Brent price will rise from $72 per barrel on November 11 to an average of $78 per barrel in 1Q25,” the EIA said in the STEO.

“By 2Q25, we expect OPEC+ production increases and supply growth from countries outside of OPEC+ will outweigh global oil demand growth and cause oil to be put into inventory,” it added.

“We expect that global oil inventories will increase by an average of 0.4 million barrels per day in 2Q25, before inventories rise by an average of 0.6 million barrels per day in the second half of 2025,” it continued.

“We forecast that inventory builds will put downward pressure on crude oil prices, with Brent falling to an average of $74 per barrel in 2H25. In our forecast, the Brent price averages $76 per barrel for the full year of 2025,” the EIA went on to state.

In its November STEO, the EIA warned that it sees “at least two main sources of oil price uncertainty - the future course of the ongoing Middle East conflict and OPEC+ members’ willingness to adhere to voluntary production cuts”.

“First, although the volatility and risk premium associated with the conflict in the Middle East has moderated in recent weeks, the duration and severity of the ongoing conflict remain uncertain, as is the potential for escalation to reduce oil supplies,” the EIA noted.

“Second, although we assess that OPEC+ producers will likely continue to limit production below recently announced targets in 2025, the potential for weakening commitment among OPEC+ producers to continue cutting production adds downside risk to oil prices,” it added.

Standard Chartered Bank Forecast

A report sent to Rigzone by Standard Chartered Bank Commodities Research Head Paul Horsnell late Tuesday showed that the company expects the ICE Brent nearby future crude oil price to average $89 per barrel in the first quarter of next year, $92 per barrel in the second quarter, $95 per barrel in the third quarter, $93 per barrel in the fourth quarter, and $92 per barrel overall in 2025.

“We think the oil market has struggled to find new coherent narratives in the wake of the U.S. presidential and congressional elections,” analysts at the bank, including Horsnell, said in the report.

“What has emerged from trader feedback constitutes more of a series of single thoughts rather than a joined-up market view, with the main points encompassing potential effects on U.S. supply and domestic energy policy, Middle East geopolitics, and global demand conditions,” they added.

“We think any expectation of an acceleration in U.S. supply growth is likely to be disappointed; we expect the strong deceleration in U.S. oil liquids growth (from 1.6 million barrel per day growth in 2023 to 0.6 million barrel per day growth in 2024) to continue into 2025,” they continued.

“We do not think federal actions were slowing U.S. shale oil supply growth, i.e., there are few immediate policy levers available other than direct subsidization should the new administration wish to accelerate supply growth,” they went on to state.

In the report, the Standard Chartered analysts noted that the market appears split on whether a second Trump administration would be positive for global oil supply but negative for global oil demand, or vice versa.

“One scenario that appears to have gained some traction among traders is that President Trump will be highly focused on measures (both domestic and international) that seek to drive global oil prices lower to offset the inflationary consequences of some his other policies; i.e., that the oil price could in effect be used as an economic safety valve in an otherwise overheating economy,” they said.

“We are not convinced that such a strategy would work as it could overly stress the supply side and cause U.S. oil supply to weaken. Costs for shale producers will likely rise at least in line with inflation, with tariffs on steel and components adding further upward pressure to costs and downward pressure on margins,” they added.

The analysts stated in the report that the returns from U.S. shale production are not so high at current prices that activity could easily withstand both significant cost increases and lower oil prices caused by deliberate policy actions.

“Attempting to use oil as an inflationary firebreak could threaten to pause the remaining regional oil booms and send other areas back into a slump,” the analysts warned.

“Production is still well below its pre-pandemic peak in the Gulf of Mexico, Oklahoma, North Dakota, Alaska and California, with the rebound in total output having been heavily dependent on Texas and New Mexico,” they added.

The Standard Chartered analysts noted in the report that the immediate market reaction to the U.S. election has been sharply lower volatility, “which appears consistent with a market pausing before deciding on a new narrative”.

“Realized 30-day Brent volatility stood at 37.4 percent at settlement on 11 November, a week on week decline of 6.9 percentage points, while 10-day Brent realized volatility fell 18.4 percentage points week on week to 28.2 percent,” they said.

“The curve has flattened, with all 72 contracts in the first six years of the Brent forward curve fitting within a band of just $3.43 per barrel at settlement on 11 November,” they added.

Rigzone has contacted the Trump campaign for comment on Standard Chartered’s report. At the time of writing, the Trump camp has not yet responded to Rigzone.

To contact the author, email andreas.exarheas@rigzone.com