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Brent expected to record longest annual losing streak ever UAE withdraws troops from Yemen, where it is at war with Saudi Arabia Oversupply offsets geopolitical risks, sanctions on producing countries US crude inventories fall, distillate and gasoline inventories rise Crude oil prices fall nearly 20% year-on-year
(Reuters) – Oil prices fell on Wednesday, posting a loss of nearly 20% for the year, as hopes of a supply glut grew in a year marked by war, higher tariffs, OPEC+ production increases and sanctions on Russia, Iran and Venezuela.
Brent crude oil futures fell about 19% in 2025, the steepest annual decline since 2020 and the third straight year of declines, making it the longest such streak in history. US West Texas Intermediate crude oil recorded an annual decline of about 20%.
On the final day of the year, Brent futures fell 48 cents, or 0.8%, to settle at $60.85 per barrel. U.S. WTI crude oil fell 53 cents, or 0.9%, to settle at $57.42 a barrel.
Jason Yin, a commodity analyst at BNP Paribas, expects Brent crude to fall to $55 a barrel in the first quarter, but recover to $60 a barrel by the end of 2026 as supply growth normalizes and demand remains flat.
“The reason we’re more bearish than the market in the near term is because we think U.S. shale producers have been able to hedge at a high level,” he said.
“Supply from shale producers will therefore be more stable and less susceptible to price fluctuations.”
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U.S. crude oil inventories fell last week, but distillate and gasoline inventories rose more than expected, according to data from the U.S. Energy Information Administration.
“It was a reasonably supportive report in terms of lower oil prices, but the report isn’t that great and with the holidays in the rearview mirror, we’re probably going to have a tough January and February,” said John Kilduff, partner at Again Capital Markets.
Crude oil inventories for the week ending Dec. 26 fell by 1.9 million barrels to 422.9 million barrels, compared with the 867,000 barrels expected by analysts polled by Reuters, the EIA said.
U.S. gasoline inventories rose 5.8 million barrels for the week to 234.3 million barrels, compared with analysts’ expectations for a 1.9 million barrel increase, according to EIA. Distillate oil inventories, which include diesel and heating oil, rose 5 million barrels to 123.7 million barrels, compared to an expected increase of 2.2 million barrels.
U.S. oil production hit a record high in October, according to the latest EIA data.
Oil markets got off to a strong start to 2025 as former President Joe Biden ended his term with tougher sanctions on Russia, disrupting supplies to major buyers China and India.
The impact of the Ukraine war on energy markets was further intensified when Ukrainian drones damaged Russian infrastructure and disrupted Kazakhstan’s oil exports.
The conflict between Iran and Israel, which lasted 12 days in June, disrupted shipping through the Strait of Hormuz, the world’s main shipping route for offshore oil, fueling oil prices and increasing threats to supply.
In recent weeks, OPEC’s biggest producers, Saudi Arabia and the United Arab Emirates, have been embroiled in a crisis over Yemen. US President Donald Trump has ordered a blockade of Venezuelan oil exports and threatened further attacks on Iran.
OPEC+’s accelerated production increase
But prices fell as OPEC+ accelerated production increases this year and concerns about the impact of U.S. tariffs weighed on the global economy and fuel demand growth.
The Organization of the Petroleum Exporting Countries and its producer ally OPEC+ have suspended oil production increases until the first quarter of 2026, after releasing about 2.9 million barrels a day onto the market since April. The next OPEC+ meeting will be held on January 4th.
Most analysts expect supply to exceed demand next year, with estimates ranging from the International Energy Agency’s 3.84 million barrels per day to Goldman Sachs’ 2 million barrels per day.
“If prices really come down significantly, you’re going to see some production cuts (by OPEC+),” said Martin Lutz, global oil strategist at Morgan Stanley. “But we’ll probably have to go much lower going forward. Probably in the low $50s.”
“If today’s prices are simply favorable, we’ll probably see some easing of these rate cuts continue after the first-quarter pause.”
John Driscoll, managing director at consulting firm JTD Energy, expects geopolitical risks to support oil prices even though market fundamentals point to oversupply.
“Everyone is saying the economy will be even weaker in 2026 and beyond,” he said. “But I’m not going to ignore geopolitics. He wants to be involved in everything, so the Trump factor will come into play.”
Reporting by Florence Tan in Singapore, Enes Zunaglu in London and Laila Kearney in New York. Additional reporting by Seher Dareen and Robert Harvey in London and Georgina McCartney in Houston. Edited by: Barbara Lewis, Jan Harvey, Rod Nickel, Nick Zieminski, David Gregorio
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