Oil oversupply could send prices tumbling in 2025, energy analyst says

The world is oversupplied with oil and prices are headed down, one analyst said.

The oil market is headed into a troubled year in 2025, and crude prices may fall “much, much” lower, according to Tom Kloza, global head of energy analysis at Oil Price Information Service.

The oil analyst said crude prices would experience more downward pressure in 2025 despite concerns that conflict in the Middle East could escalate and send prices higher.

Traders shouldn’t bet on supply disruptions in the Middle East, and the world is already so oversupplied with oil that prices are bound to drop, he said in an interview with CNBC on Wednesday.

The US produced more oil than any other country in history in 2023, according to data from the Energy Information Administration. The production boom will likely last until at least 2026, Goldman Sachs previously estimated, pointing to factors like increased drilling efficiency.

OPEC+, the oil cartel led by Saudi Arabia, is also expected to churn out more crude oil by the end of the year, Kloza said, pointing to a recent ministerial meeting that reviewed oil market conditions.

“It was pointing lower, and I think it’s still pointing lower. Because, you have to consider that there’s probably around 600,000 or 700,000 [barrels] of additional crude for export that’s going to come out as temperatures moderate in Saudi Arabia and Iraq,” Kloza said. “You have a market that’s pointed to the downside.”

Kloza brushed off concerns that supply disruptions could arise from conflict in the Middle East.

“It’s not a probability. It’s a little like, there’s a possibility that the Giants and the Jets could be winning the Super Bowl this year, but I wouldn’t be betting on it,” he said.

Kloza said big investors are also no longer trying to “chase” oil, which he believed could limit the upside of crude prices.

He pointed to estimates from other energy forecasters, who have predicted that oil prices could trade as low as $50 a barrel, a decline of about 37% from where Brent crude was trading on Thursday.

“I think that oil is destined for much, much lower numbers, and whoever wins the presidency next month is going to have a problem of maybe a little bit of oil deflation. All the balances for 2025 point to more oil than the world really needs, and if you have OPEC+ coming back to the market with some of that production that they cut, I think it’s a real problem in 2025,” he said.

Brent crude was up by about 3.7% on Thursday, while US oil prices 3.6%.