-
Why Analysts Think Oil Prices Will Remain Subdued
Oil prices will likely remain around current levels or even lower this year, analysts and economists in the monthly Reuters poll said last week.
Sufficient oil supply and spare capacity within the OPEC+ group will be enough to keep prices in the low $70s per barrel, the experts said.
Supply shocks would be balanced out with the 5 million barrels per day (bpd) of spare capacity that OPEC+ currently has, mostly within the Middle Eastern producers in OPEC.
Major trade and geopolitical developments since last week are likely to put additional downward pressure on oil prices—the tariffs on Canada and Mexico and the higher tariff on Chinese imports into the U.S., and the possibility of some eased sanctions on Russia.
The four dozen analysts participating in the Reuters poll last week saw Brent Crude prices averaging $74.63 per barrel in 2025, slightly higher compared to the forecast of $74.57 in January. For WTI Crude, analysts expect an average 2025 price of $70.66 per barrel, up from $70.40 in January.
At the time the survey was carried out, oil prices were more or less trading around these levels.
But early this week, oil slumped after the Trump Administration confirmed that tariffs on Canada and Mexico are going ahead as planned on March 4, and the tariff on Chinese goods is lifted to 20% from 10%. Canada and Mexico tariffs are at 25%, with Canadian energy facing a lower, 10%, import tariff.
Economic Fallout from Tariffs
On the first trading day of March, major Wall Street indexes turned sharply lower after the Trump Administration announced that the tariffs on Canada and Mexico, and higher levies on China are going into effect on Tuesday.
The S&P 500 index fell by nearly 2% for the steepest one-day drop so far this year. The broad-based index has erased nearly all the 6% gain since Election Day and is now only 1% higher compared to early November when President Donald Trump was elected. The Dow Jones Industrial Average (DJIA) slumped by 1.5%, and the Nasdaq composite dipped by 2.6%.
The rally in the weeks since November has been largely due to hopes that the Trump Administration would boost U.S. businesses and the economy.
But tariffs could undermine the growth plans of many businesses, and the economy is likely to slow down, analysts say.
A weakening economy, the world’s largest at that, could dampen oil demand in the U.S. and globally—that’s why the market hasn’t been very bullish about oil prices in recent weeks.
Some estimates have even started to point to the U.S. economy contracting in the first quarter. The GDPNow model of Atlanta Fed, not an official forecast but a running estimate of real GDP growth based on available economic data, shows a forecast of real annual GDP growth for Q1 at a negative -2.8% on March 3, down from a -1.5% forecast on February 28. The estimate was revised down after releases from the US Census Bureau and the Institute for Supply Management. The GDPNow forecast of first-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 1.3% and 3.5%, respectively, to 0.0% and 0.1%.
Share This
