In-depth analysis

January 21, 2025

We forecast benchmark Brent crude oil prices will fall from an average of $81 per barrel (b) in 2024 to $74/b in 2025 and $66/b in 2026, as strong global growth in production of petroleum and other liquids and slower demand growth put downward pressure on prices and help offset heightened geopolitical risks and voluntary production restraint from OPEC+ members. This forecast was completed before the United States issued additional sanctions targeting Russia’s oil sector on January 10, which have the potential to reduce Russia’s oil exports to the global market.

We forecast prices will fall to an average of $66/b in 2026 mainly because of growing production in countries outside OPEC+ and demand growth that is less than the pre-pandemic average. These factors reduce forecast oil prices because production outpaces consumption, increasing global oil inventories. We expect OPEC+ members to continue to restrain production in 2025 and 2026 to prevent prices from falling further.

Ultimately, we expect lower prices will reduce drilling activity and investment in U.S. production of crude oil and other liquids, leading to a small increase in production in 2026.

Significant uncertainty remains in all aspects of oil supply and demand, which will influence oil prices given any differences compared with our forecast. OPEC+ members might change their policies as they face the prospect of ceding further market share to countries outside of the group. U.S. crude oil and other liquids production has been highly sensitive to changes in crude oil prices, and a small difference in prices with our forecast would alter the growth or decline of U.S. production. Lastly, we forecast relatively slow growth in global oil consumption, but changes in economic growth rates and other systemic changes could significantly alter the trajectory compared with our forecast.

Will recent trends in global oil supply growth continue?

In both 2023 and 2024, oil production outside of OPEC+ was strong enough to largely offset the increase in global oil consumption despite reduced production from OPEC+. Members of OPEC+ reduced production by an estimated 1.3 million barrels per day (b/d) in 2024, while production by countries outside the group increased by 1.8 million b/d. We anticipate that production growth outside of OPEC+ will remain strong in 2025, before waning in 2026, while OPEC+ production cuts are gradually unwound.

Growth in global oil production over the last two years has been led primarily by countries in North and South America, especially the United States, Canada, Guyana, and Brazil. Those four countries alone increased their total liquids production by a combined 1.1 million b/d in 2024. We expect they will increase their production by an additional 1.0 million b/d in 2025 and 0.9 million b/d in 2026. However, it is uncertain whether those countries can sustain high levels of growth over the next two years given the potential for constraints around takeaway capacity or delays in project startups.

We are expecting a slowdown in liquids production growth from the United States in 2026. In our forecast, U.S. crude oil production flattens in 2026 because operators will reduce the number of active drilling rigs as crude oil prices fall, allowing natural declines in existing wells to overtake production from new wells next year. Production in the Permian region—the largest source of world crude oil production growth in the past 15 years—still grows, but at a slower rate than previous years and will be offset by declines in all other shale basins, conventional onshore production, and offshore production.

We forecast U.S. crude oil production will reach an all-time high in 2025, averaging 13.5 million b/d, increasing slightly to 13.6 million b/d in 2026. Uncertainty in our price forecast implies uncertainty in our outlook for U.S. crude oil production.

Falling U.S. production growth in 2026 adds uncertainty for global supply growth. Although we expect OPEC+ supply to grow as the latest round of voluntary production cuts are scheduled to unwind by 2026, these OPEC+ production increases have already been delayed several times and are their own source of uncertainty.

Will OPEC+ continue to restrain oil production?

In response to growing global oil inventories and falling oil prices in 2023, OPEC+ producers agreed to begin their first round of reduced oil production targets and additional voluntary production cuts in April 2023. The latest agreement in December 2024 shifted the timeline for relaxing some of these cuts into 2026. The effectiveness of these production cuts on oil prices has thus far been limited. Although there have been short-term upward price movements in response to the announced cuts, Brent prices were lower in December 2024, at an average of $74/b, than when the cuts were first announced in April 2023, at an average of $85/b.

Based on our expectation that oil production will continue to grow outside of OPEC+, it remains to be seen whether OPEC+ members will continue adhering to lower production targets while countries outside of the group increase production and put downward pressure on oil prices. If the production cuts continue to see diminishing returns relative to their impacts on oil prices and export revenue, the potential for dissent within OPEC+ could increase, leading some members to unilaterally increase production or to leave the agreement entirely.

Lastly, geopolitical uncertainties still have the potential to affect supply from several OPEC+ members. While conflict in the Middle East has yet to disrupt oil supplies, continued tensions as well as recent unrest in Syria could pose further risks. In addition, future decisions by G7 countries related to sanctions on some OPEC+ countries, such as the recent round of sanctions imposed on Russia, add considerable uncertainty to our OPEC+ forecast.

Will global oil demand growth remain below pre-pandemic averages?

Last year was the first year since the COVID-19 pandemic in which population growth, economic growth, and oil consumption weren’t affected by pandemic-related reductions or recovery. World liquid fuels consumption grew less than the decade prior to the pandemic (2010–19) and will continue to grow more slowly in 2025 and 2026. Led by India, Asian countries (excluding China and Japan) and emerging markets in the Middle East and Africa will grow world liquid fuels consumption by 1.3 million b/d in 2025 and 1.1 million b/d in 2026, less than the 2010–19 average of 1.5 million b/d.

We forecast that liquid fuels consumption in China will grow considerably more slowly than prior to the pandemic. China’s government has signaled its willingness to introduce stimulative monetary and fiscal policies following slower economic growth in 2024. Our forecast assumes China’s GDP will grow 4.4% in 2025 and 4.1% in 2026, but economic stimulus or other measures could significantly alter China’s economic growth, which would also affect oil consumption and introduces significant uncertainty to our consumption forecast. In addition, the country is selling more electric vehicles and alternative fueled trucks. Depending on the rate of sales growth and overall market penetration of these vehicles, our consumption forecast for China could differ significantly.

Growth in U.S. consumption of liquid fuels is also highly uncertain. Our forecast assumes U.S. GDP growth of 2% in both years, with industrial production growing 1% in 2025 and 2% in 2026, which is faster than pre-pandemic industrial production growth. These factors increase distillate consumption, as stronger industrial activity increases demand for trucking, the largest consumer of on-road diesel.

Principal contributors: Jeff Barron, Sean Hill