Fitch lowered its oil price assumption for 2025 to USD65 per barrel from USD70 per barrel in April, while maintaining medium-term and mid-cycle price assumptions, APA reports citing the Agency.
"We now assume global oil demand will grow by about 800,000 barrels per day (bpd) this year, compared with our previous expectations of slightly over 1 million bpd. The market will remain oversupplied in 2025 due to faster supply growth.
OPEC+ has announced an oil output increase of 411,000 bpd for July for the third consecutive month. This policy shift is exerting pressure on oil prices as OPEC+ continues to diverge from its previous strategy of price support. The rationale behind OPEC+'s decision includes penalising non-compliant members, but it may also indicate a growing willingness to defend market share, which could further affect oil prices. OPEC+ spare production capacity was high at 5.7 million bpd in May.
The US, Brazil, Canada, Guyana and Argentina will collectively contribute just under 1 million bpd to additional production in 2025, as forecast by the International Energy Agency. Large US production companies need market prices of USD 61 per barrel on average to drill new shale oil wells profitably, according to the Dallas Fed Energy Survey published in March 2025. This means that drilling may slow down. A further drop in oil prices in 2025 could lead to a slowdown in non-OPEC+ production growth, but we believe growth will remain significant given largely committed investments.
Geopolitical factors continue to play a pivotal role in oil price dynamics. Additional sanctions on Russia, Iran or Venezuela could increase oil prices. Similarly, any escalation in the conflict between Israel and Iran might result in higher crude prices," Fitch noted.
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