Oil Price Prediction

Oil prices have fluctuated over the years based on supply and demand, geopolitical events and the global economy. They’ve risen and fallen throughout 2024 against the backdrop of Israel’s war with Hamas, the U.S. oil reserve dropping faster than expected, the U.S. presidential election, OPEC+’s plans to increase production and China’s announcement of a monetary stimulus.

Any of these dynamics could change at a moment’s notice, making oil price prediction challenging. Still, market watchers and energy professionals can make educated projections based on current knowledge. Many expect global crude oil prices to hold steady through the end of 2024 and drop throughout 2025.

Historical Trends in Oil Prices

Crude oil use can be traced back to ancient times, when petroleum was employed for waterproofing, construction and lighting.

The modern oil industry sprang up in the mid-to-late 1800s and the price of oil took center stage as the world became more dependent on oil due to the First World War, the growth in the popularity of the automobile and research into new uses for petroleum.

By the 1960s, oil price prediction began to play a key role in the world economy after a series of hikes in oil prices turned into an oil crisis.

In 1960, the Organization of Petroleum Exporting Countries (OPEC) was formed to reduce competition among oil-producing countries and increase control of oil prices. An OPEC embargo of countries supporting the Yom Kippur War in 1973, including the United States, drove the price of oil from $2.48 a barrel in 1972 to $11.58 in 1974.

Brent crude oil was discovered in the North Sea in the mid-1970s and crude oil prices rose rapidly to $36.83 per barrel from 1979 to 1980, when Iran cut production and exports at the beginning of the Iran-Iraq War. Prices fell back as Russia, the largest oil producer by 1988 and others increased production.

In 2003, the U.S. invaded Iraq, creating regional uncertainty and China’s growth increased demand, sending oil prices soaring from $37.96 per barrel in 2003 to $145.31 per barrel in 2008. Oil prices eventually fell but later rose with another geopolitical event, the Arab Spring of 2011. That year, the price of oil hit $113.39 per barrel.

In April 2020, oil prices sank below zero, dropping to -$37 per barrel due to the COVID-19 pandemic and a dispute that left Russia, Saudi Arabia and OPEC unable to agree on curtailing production.

Current State of the Oil Market 

Technological advances in 2015 helped the U.S. gain world dominance in oil production through hydraulic fracturing or fracking. The U.S. leads the world in oil production through shale oil production, making an oil forecast dependent on U.S. production and demand from Asian countries, such as China.

Commodity buyers value oil based on benchmarks from the oil industry. In the U.S., the benchmark is West Texas Intermediate (WTI) for light and sweet oil from wells in Oklahoma. International oil futures markets use Brent Blend, a light and sweet crude from the North Sea.

Oil industry analysts ascribe a 1% drop in oil prices on November 6, 2024, to Donald Trump’s victory to another four years in the White House. Brent Crude dropped to $74.53 per barrel at 10:40 a.m. and WTI fell to $71.06.

Analysts believe that Trump’s policies, including a vow to pump more U.S. oil and impose tariffs on Chinese exports, could further weaken demand. His stated policies also sent the value of the dollar surging. That could make oil, which is predominantly backed by the U.S. dollar, more expensive for countries with other currencies.

Oil prices recovered from some of the loss on November 7, 2024, closing at $75.52 per barrel for Brent and $72.36 per barrel for WTI.

Oil drilling in the U.S. already hit a high under President Joe Biden and is expected to grow by another 500,000 barrels per day in 2025, leading one analyst to conclude that oil company executives might better manage drilling to maintain profitable pricing.

Predictions for Future Oil Prices

Despite oil price increases in early October, the U.S. Energy Information Administration (EIA) lowered its oil forecast to $78 per barrel. That’s $7 per barrel less than its projection in September. The oil price prediction for the remainder of 2024 is for costs to range between $75 and $85 per barrel.

China recently announced an economic stimulus plan, but the EIA and oil industry analysts expect China's demand for oil, the world’s largest importer, to continue weakening through the first half of 2025.

Demand is also expected to slow in countries that belong to the Organization for Economic Cooperation and Development (OECD), including the United States. Strife in the Middle East continues to inject uncertainty into oil pricing.

OPEC+ nations continue to look for a floor to support oil prices but cut its demand outlook in October 2024. That raises a lot of uncertainty since OPEC+ announced earlier in 2024 that it would end voluntary cuts in production in December 2024. Spot oil prices for OPEC+ are based on the Dubai/Oman benchmark.

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Factors Affecting Future Oil Prices

Supply and demand drive global oil markets. A rising oil supply on the worldwide market that outstrips demand can create downward pressure on oil prices. Likewise, a shortage of oil pushes prices up.

In the second half of 2024, oil prices have been slipping as worldwide production increased and demand slowed. However, uncertainty abounds as the market waits to see what happens between Israel and Iran. An escalation in fighting could disrupt Iranian oil production, driving up oil prices.

A political dispute in Libya briefly disrupted oil production there but has since been resolved. Potential sanctions against Iran and possible tariffs on imports, especially from China, could drive markets in either direction. A shortage caused by a lack of Iranian production would lower oil prices, while a slowdown in demand from China would increase them.

Uncertainty Lowers Oil Price Predictions

The oil forecast for the remainder of 2024 and early 2025 keeps oil trading prices at around $80. But questions about Trump’s economic and foreign policies, conflicts in the Middle East, China’s economic status and OPEC+’s next moves abound, leading many to expect lower oil prices throughout most of 2025.

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