Daily Spotlight: Oil Prices May Trend Lower as Production Rises

Summary

The current price of a barrel of the crude oil benchmark grade West Texas Intermediate has fallen below $70, down from a high near $90 in April and lower by 3% from the start of 2024. Oil prices are down sharply from the $$115-120 level, touched back in 1H22 when Russia invaded Ukraine. For 2024, we are now anticipating an average price of $78, compared to $80 in 2023 and $95 in 2022. We look for a barrel of West Texas Intermediate crude oil in 2025 to average $75, up from current levels but lower year over year, with a trading range of $90-$65 for the year. The core drivers behind oil prices over the long term come from Econ 101: global supply and demand. According to the U.S. Energy Information Administration, there has been modest excess demand for oil in 2024: global consumption is estimated at 103.1 million barrels per day, while global production is estimated at 102.6 million barrels. But forecasts for 2025 call for supply to exceed demand, which is likely to provide a ceiling to oil prices. Of course, there are always wildcards, such as geopolitical developments, ranging from wars (i.e., Russia’s invasion of Ukraine) to sanctions (Iran, Venezuela) to turmoil in the Middle East, to the outcome of the U.S. presidential and congressional ele

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