Oil Prices Record Steepest Annual Fall Since Covid Pandemic in 2025
In 2025, oil prices experienced their steepest annual decline since the Covid era, falling almost 20% and marking the first three-year run of losses. Brent crude closed 2025 at $60.85 per barrel, down from about $74 per barrel at the end of 2024, while US WTI fell about 20% to $57.42 per barrel. In December 2025, crude prices slipped below $60 per barrel for the first time in nearly five years.
The International Energy Agency (IEA) projects that oil supply will exceed demand by approximately 3.8 million barrels per day in 2026. OPEC+ has deferred any production increases until after the first quarter of 2026. Analysts forecast further declines, with BNP Paribas expecting Brent crude around $55 per barrel and JPMorgan Chase and Goldman Sachs predicting prices remaining in the $50s.
Macquarie described the downward momentum as 'cartoonishly oversupplied', surpassing their already weak expectations. This oversupply is driven by weaker global economic growth and US-China trade tensions that have suppressed demand. Additionally, progress toward a Russia-Ukraine peace deal could lift sanctions on Russian oil exports, further widening the surplus.
While falling oil prices could help lower fuel costs and reduce inflationary pressures, pump prices have stayed high. In related developments, Ofgem raised the energy price cap by 0.2% for January to March 2026, increasing the typical dual-fuel household bill to £1,758.
