Fitch Ratings has announced a reduction in its short-term oil price forecasts for Brent and WTI for 2025, primarily due to anticipated lower economic growth tied to the ongoing trade war and unexpectedly high production increase plans from OPEC+. However, the ratings agency has kept its medium-term oil and gas price assumptions stable. The reduction in short-term oil price expectations stems from a significant slowdown in global economic growth, projected to decline to 1.9% in 2025, down from 2.9% in 2024.
This slowdown is expected to decrease oil demand, with predictions indicating that global demand will rise by less than 1 million barrels per day (MMbpd) in 2025. This decline is influenced largely by slower growth in China and a downturn in the petrochemicals sector, which is already experiencing a downturn. OPEC+ is said to have substantial spare production capacity, estimated at 5.6 million barrels per day.
Its approach to supply management will play a crucial role in balancing the oil market. The group plans to gradually unwind its production cuts, with an increase in production of 2.2 MMbpd set from April 2025 to September 2026. The announced production increase for May stands at 411 kbpd, although this is conditional on market conditions, and actual increases could be lower due to overproduction from certain member countries.
For 2025, Fitch expects the global oil market to remain oversupplied, predicting an increase in global oil supply exceeding 1.6 MMbpd if OPEC+ follows through with its planned cuts’ rollback. This scenario may lead to reduced new well starts in the U.S., as many producers require a WTI price of USD65 per barrel to operate profitably, according to the Dallas Fed Energy Survey. Additionally, new U.S. sanctions on oil exports from Iran and Venezuela could influence their production and export capabilities.