Crude sheds 20% in 2025 as supply glut, weak demand, and Trump’s energy agenda overwhelm markets; Structural surplus persists despite heightening geopolitical tensions.

(Bloomberg) - In early January 2025, Brent crude was trading at $76.22 while U.S. West Texas Intermediate (WTI) stood at $73.56. Expectations were cautious but optimistic. Fast forward to Dec. 31, 2025: few anticipated that "Black Gold" would end the year with a collapse exceeding 20%, marking its worst annual performance since the pandemic-shattered year of 2020.

Today, Brent is closing near $61.50, with WTI at $57.90, down sharply from annual peaks of $81.86 and $78.99, respectively. The annual loss, estimated between 17% and 20%, is a complex narrative woven from geopolitical decisions, structural surpluses, Saudi-Russian frictions, sluggish Chinese demand, and Donald Trump’s aggressive new energy mandates.

Q1: The Optimistic Prelude

The year began quietly. Brent traded at $76.22 on Jan. 6, supported by moderate demand forecasts and the OPEC+ decision to maintain voluntary production cuts of 1.65 million barrels per day (bpd) across eight nations (Saudi Arabia, Russia, UAE, Iraq, Kuwait, Kazakhstan, Algeria, and Oman).

However, cracks surfaced quickly. China - the world’s largest oil importer - struggled with a property sector crisis, low consumer confidence, and high local government debt. Chinese demand failed to meet projections, exerting immediate downward pressure on global prices. By February, global inventories began to rise, signaling a tilt toward a structural surplus.

Q2: The ‘Trump Shock’ and ‘Liberation Day’

The real storm hit in April. Following his January inauguration, President Donald Trump announced a comprehensive tariff package dubbed "Liberation Day" on massive U.S. imports, including those from OPEC+ nations. The shock was violent; financial markets recoiled, and global oil demand forecasts were slashed. Within weeks, Brent shed approximately $10.

The White House’s strategy was clear: target oil at $50 per barrel or lower to combat inflation. Natasha Kaneva, head of global commodities strategy at J.P. Morgan, noted: "While trade escalations cooled toward mid-year, the 'Trump put' did not extend to energy. The administration prioritized lower oil prices as a top-tier agenda item for inflation management."

May-June: The OPEC+ Surprise

In May, OPEC+ shocked the market. Despite maintaining massive cuts totaling 5.85 million bpd in April, the alliance announced a plan to increase production by 411,000 bpd starting in June.

The move was seen as a pivot toward "revenue via volume" rather than "revenue via price." Drivers included the rise of non-OPEC production from the U.S., Brazil, and Guyana (expected to grow by 800,000 bpd in 2025) and internal pressures to reclaim market share. The result was an immediate 6% price crash, sending Brent below $65.

Q3: Deepening Structural Surplus

By September, global oil production had risen by 5.6 million bpd year-over-year. OPEC+ accounted for 3.1 million bpd of this increase, while non-OPEC+ producers added 1.6 million bpd.

The IEA estimated a global surplus of 1.9 million bpd since the start of the year. Global inventories hit a four-year high in October at 8,030 million barrels. Most alarming was the surge in "oil on water" - crude stored on tankers - which jumped by 102 million barrels in September alone, the largest increase since the COVID-19 pandemic.

Q4: Geopolitical Failures and the 2026 Outlook

In a break from historical norms, geopolitical risks failed to provide a price floor in late 2025:

• Russia-Ukraine: Drone strikes hit over half of Russia’s 38 refineries, yet prices barely moved.

• Middle East: Tensions between Iran and Israel and Saudi airstrikes in Yemen were overshadowed by the sheer volume of oversupply.

• Venezuela: U.S. blockades and strikes on loading facilities failed to rally the market.

In November, North Sea Dated fell for the fifth consecutive month - the longest losing streak in 11 years. On Nov. 2, OPEC+ nations agreed to freeze production increases for Q1 2026, an admission that the market was saturated.

Reference Data Tables

Table 1: Monthly Oil Price Evolution (2025)

Table 2: Geopolitical Timeline & Price Impact

Table 3: Global Oil Balance (2025)

Table 4: OPEC+ Production Adjustment Cycle

Table 5: Russian Oil Exports & Revenue (2025)

Table 6: 2026 Price Forecasts

Table 7: 2025 Commodity Performance Comparison

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