Global oil markets

Global oil prices and inventories
The spot price of Brent crude oil averaged $79 per barrel (b) in January, $5/b higher than in December. Crude oil prices increased immediately following the January 10 announcement of a new round of sanctions on Russia's oil shipments. Prices gradually fell over the course of the month as concerns around weak global oil demand growth and oversupply regained focus from market participants. The Brent spot price began February around $76/b, about the same as at the start of January.

On February 1, President Donald J. Trump signed an Executive Order announcing the imposition of tariffs on imports from Canada, Mexico, and China. Subsequently, the implementation of tariffs for imports from Mexico and Canada were delayed by 30 days, so the effects of those two policies are not reflected in this outlook. U.S. tariffs placed on imports from China through that Executive Order, as well as China’s retaliatory tariffs placed on select imports from the United States, are incorporated in this outlook and remain through the entire forecast period. Although the future imposition of tariffs could affect oil trade routes, we do not presently anticipate the tariffs put forward in the February 1 executive order would significantly affect global oil supply. Still, the possibility of future tariffs and the new sanctions on Russia are sources of uncertainty for oil prices going forward.

Our assessment is that although the latest sanctions on Russia will slightly reduce Russia’s oil production compared with what we forecast last month, they will mostly result in shifts in global oil trade flows, which we do not forecast in our outlook. The sanctions do not markedly impact global oil balances, or our forecast of Brent crude oil prices compared with last month’s STEO. We still anticipate that global oil inventories will fall by 0.5 million b/d in the first quarter of 2025 (1Q25) because of OPEC+ production cuts, which the organization recently reaffirmed.

However, we expect global oil inventories will begin increasing once OPEC+ begins raising production, starting in April 2025. These production increases combined with expectations of relatively weak global oil demand growth will lead to a 0.9 million b/d increase in global oil inventories in the second half of 2025 (2H25) and a 1.0 million b/d increase in 2026.

We expect that currently falling global oil inventories and increased uncertainty will keep crude oil prices at an average of $77/b through 1Q25, before increasing inventories again begin putting downward pressure on prices through the remainder of our forecast. As a result, we forecast the Brent crude oil price will fall to $72/b in December 2025, averaging $74/b in 2025 before falling to an average of $66/b in 2026.

As previously noted, significant uncertainty remains in our oil price forecast. The impact of recently announced sanctions and tariffs on Russia and China have heightened oil price volatility in the short term while markets and trade patterns adjust. In addition, the eventual resolution of the delayed tariffs on oil volumes from Canada and Mexico as well as the potential for sanctions on oil volumes from Iran remains, which have the potential to influence oil prices. Lastly, our previously noted sources of uncertainty all remain and are likely to have lasting impacts on oil prices throughout the STEO forecast period ending next year.

Global oil production and consumption
Growth in global liquid fuels production in 2025 and 2026 in our forecast increases due to both the relaxation of OPEC+ production cuts and further growth from countries outside of OPEC+. Global liquid fuels production increases by 1.7 million barrels per day (b/d) in 2025, up from growth of 0.6 million b/d in 2024. We expect growth of 0.1 million b/d in 2025 from OPEC+ producers, compared with a decrease of 1.3 million b/d in 2024, before the group increases production by 0.6 million b/d in 2026. We expect voluntary production cuts to unwind but remain at levels below their targets in an effort by the group to limit increases in global oil inventories.

We still expect global growth in liquid fuels production during 2025 to be led by countries outside of OPEC+, increasing by 1.6 million b/d before slowing slightly in 2026 to growth of 1.0 million b/d. Growth outside of OPEC+ is driven by the United States, Canada, Brazil, and Guyana through 2026.

Oil consumption growth in our forecast continues to be slower than the pre-pandemic trend. Our forecast of global liquid fuels consumption increases by 1.4 million b/d in 2025 and 1.0 million b/d in 2026, driven primarily by demand from non-OECD Asia. We expect India will increase its consumption of liquid fuels by 0.3 million b/d in both 2025 and 2026, compared with an increase of 0.2 million in 2024, driven by rising demand for transportation fuels. We forecast China’s liquid fuels consumption will grow by 0.2 million b/d in both 2025 and 2026, up from growth of less than 0.1 million b/d in 2024 as China’s economic stimulus efforts increase petroleum consumption.