The recent rally in oil prices is challenging the bearish outlook that many analysts had for 2025. This surge has been fueled by a combination of geopolitical tensions and seasonal demand increases. The Biden administration's aggressive sanctions on Russian oil have tightened supply, while cold weather has boosted demand, leading to a significant rise in Brent crude futures. The premium on prompt Brent contracts has reached a six-month high, indicating strong current demand relative to future supply expectations. This shift has prompted institutions like Morgan Stanley and Citigroup to revise their price forecasts upward.
However, the sustainability of this rally is in question. Indian refiners expect the disruption in Russian oil flows to be temporary, as Russia may find ways to circumvent the sanctions. Additionally, concerns over China's faltering fuel demand, exacerbated by its deflationary spiral and a shift towards electric vehicles, could dampen future oil demand. The potential for a global surplus looms, with new supplies from the US, Guyana, Canada, and Brazil expected to flood the market. OPEC+ may need to reconsider its production plans in March to address these imbalances.
As of 08:12 on January 14, the price of crude oil stands at $78.26, slightly down from its last close of $78.82. Despite the recent rally, the market remains cautious about the potential for oversupply and shifting demand dynamics in the coming months.