The U.S. Energy Information Administration (EIA) has revised its Brent crude oil spot price forecast, projecting a lower average through 2025 due to expectations of reduced global oil demand. According to the EIA’s October Short-Term Energy Outlook (STEO), Brent crude is now expected to average $78 per barrel (bbl) in 2025, which is $7 less than its previous forecast from last month.
Declining Demand Drives Price Forecast Reduction
EIA’s revision largely reflects a slower-than-expected growth in global oil demand, particularly in 2025. “We forecast that global consumption of liquid fuels will increase by 900,000 barrels per day (b/d) in 2024 and 1.3 million b/d in 2025,” the agency reported. However, both forecasts represent downward revisions from previous estimates.
This reduction is attributed to weaker demand in China and OECD (Organisation for Economic Co-operation and Development) countries. For China, the EIA revised its forecast due to lower crude oil imports and reduced refinery operations in the third quarter of 2024. While China’s recent economic stimulus measures might boost petroleum consumption in 2025, the EIA maintained its conservative growth outlook, expecting China’s petroleum consumption to rise by 100,000 b/d in 2024 and 300,000 b/d in 2025.
The EIA also cut its projection for OECD countries, lowering total oil consumption estimates by 200,000 b/d for 2025. This adjustment comes amid weaker industrial production and manufacturing growth in the U.S. and Canada.
Non-OECD Nations Lead Global Demand Growth
Despite the weaker forecasts for OECD countries, the bulk of global demand growth is expected to come from non-OECD countries. The EIA anticipates these countries will increase their liquid fuel consumption by 1 million b/d in 2024 and 1.2 million b/d in 2025. In contrast, demand in OECD countries is predicted to fall by 100,000 b/d in 2024, before rising by a similar amount in 2025.
Rising Geopolitical Tensions Impact Oil Markets
While the EIA has lowered its crude oil price forecast, recent geopolitical tensions in the Middle East have injected volatility into global oil markets. Escalating conflicts, particularly involving Israel, Lebanon, and Iran, have raised concerns about potential supply disruptions. The Brent crude spot price rose to $79/bbl on October 4, up 11% from the previous week, following a missile attack by Iran on October 1.
The EIA acknowledged the potential for further price increases depending on the geopolitical situation. However, it emphasized that its lower forecast is primarily driven by expectations of reduced demand next year.
Oil Production Forecasts: Steady Growth Outside OPEC+
The EIA expects global oil production to increase significantly by 2025, with non-OPEC+ countries leading the way. Worldwide production of petroleum and other liquid fuels is projected to grow by 2 million b/d in 2025, compared to a modest growth of 500,000 b/d this year.
Non-OPEC+ countries are expected to contribute 1.4 million b/d to this growth in 2025, while OPEC+ production is expected to rise by 700,000 b/d, after voluntary cuts this year reduced OPEC+ output by 1.3 million b/d.
A force majeure in Libya, which significantly cut the country’s oil production to 400,000 b/d in September 2024 from nearly 1.2 million b/d in July 2024, contributed to the reduced output from OPEC+. The EIA expects Libya’s production to recover to 600,000 b/d by the end of 2024, following the resolution of the disruptions.
US Oil Production Outlook Revised Downward
In the U.S., the EIA has revised its forecast for crude oil production from the Lower 48 states (L48) for 2025. The agency now expects production to reach 11.3 million b/d in 2025, a 1% reduction from last month’s forecast. This revision reflects lower expected prices for West Texas Intermediate (WTI) crude, which the EIA now predicts will average $72/bbl in the fourth quarter of 2024, down $6 from the previous forecast.
Due to a lag between price changes and production activity, the recent price decline is expected to reduce U.S. crude output starting in mid-2025. By December 2025, the EIA forecasts U.S. L48 production will reach 11.4 million b/d, 2% lower than its September projection.
As global demand slows and geopolitical risks continue to create uncertainty, the oil market remains volatile, with significant implications for future pricing and production trends.
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