Oil prices fell on the last day in 2025, putting the market on track for its largest annual decline since 2020, as expectations of a global supply surplus outweighed geopolitical risks and signs of tightening U.S. crude inventories.
Brent crude futures were down nearly 18% for the year, marking their third consecutive annual loss. The March contract, which expires later on Wednesday, slipped 0.1% to $61.54 a barrel.
U.S. West Texas Intermediate (WTI) crude also edged lower, falling 0.1% to $58.16 a barrel, and is heading for an annual decline of about 15%.
Data from the U.S. Energy Information Administration (EIA) showed that crude oil inventories declined last week, while gasoline and distillate stocks posted larger-than-expected increases.
Crude inventories fell by 1.9 million barrels to 422.9 million barrels in the week ending December 26, exceeding analysts’ expectations for a draw of around 867,000 barrels.
Inventories at the key delivery hub in Cushing, Oklahoma, rose by 543,000 barrels.
Refinery crude throughput increased by 71,000 barrels per day, while refinery utilization rates edged up 0.1 percentage points.
On the products side, gasoline inventories rose by 5.8 million barrels to 234.3 million barrels, far above forecasts for a 1.9 million-barrel increase.
Distillate stocks, including diesel and heating oil, climbed by 5 million barrels to 123.7 million barrels, compared with expectations for a 2.2 million-barrel rise.
Net U.S. crude imports fell by 957,000 barrels per day, the EIA said.
Oil markets started 2025 on a strong footing after former U.S. President Joe Biden imposed tougher sanctions on Russia near the end of his term, disrupting crude flows to major buyers China and India, according to Reuters.
Geopolitical tensions intensified as the war in Ukraine escalated, with Ukrainian drone attacks damaging Russian energy infrastructure and disrupting Kazakhstan’s oil exports. A 12-day conflict between Iran and Israel in June also threatened shipping through the Strait of Hormuz, briefly pushing prices higher.
Risks rose further after U.S. President Donald Trump ordered a blockade on Venezuelan oil exports and warned of possible additional strikes on Iran.
However, prices retreated as the OPEC+ alliance, which includes OPEC and its allies, accelerated production increases during the year, while concerns grew over the impact of U.S. tariffs on global economic growth and fuel demand.
OPEC+ has decided to pause production increases in the first quarter of 2026, after adding roughly 2.9 million barrels per day to the market since April. The group is scheduled to hold its next meeting on January 4.
Most analysts expect global supply to exceed demand next year, with estimates ranging from a surplus of 3.84 million barrels per day by the International Energy Agency, to about 2 million barrels per day according to Goldman Sachs.
“Significant price declines could push OPEC+ to reintroduce some production cuts,” Martijn Rats, an analyst at Morgan Stanley, told Reuters. “But prices may need to fall further, potentially toward the $50-a-barrel range.”
“If prices stabilize at current levels after the first-quarter pause, the alliance is likely to continue unwinding its cuts,” he added.
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