Oil price forecast 2025-2050: Price could fall below $100/bbl
By Yoke Wong
Edited by Vanessa Kintu
13:18, 31 March 2022
Oil prices fluctuated over the past month to hit a 14-year high in early March following the invasion of Ukraine. Although prices have since eased, supply concern remains as sanctions on Russia cut global availability.
Nearly two weeks after Russia’s invasion of Ukraine on 24 February, the US announced on 8 March that the country will ban Russian oil imports, while the UK said it will phase out Russian oil over the year. This pushed the West Texas Intermediate (WTI) crude oil futures prices to $130.50 a barrel on 7 March, the highest since July 2008.
WTI crude oil price chart
However, with China imposing new quarantine measures to curb rising Covid-19 cases in several provinces since early March, with Shanghai the latest city to enter lockdown this week, there are growing concerns on lower demand from the world’s largest oil consumer. Daniel Hynes, senior commodity strategist at ANZ Commodity, said:
“The market is also grappling with the impact of lockdowns in China which are weighing on crude oil demand. A sharp slowdown in mobility in Shanghai, which accounts for 4% of China’s oil consumption, could lower overall consumption in China.”
Demand concerns along with the potential de-escalation in Ukraine amid negotiations have led to oil prices falling from the peak in early March. The WTI May 2022 contract traded on the New York Mercantile Exchange (NYMEX) last settled at $104.24, down 20% from the peak earlier this month but up 0.8% from the beginning of March. Oil prices have gained 36% compared to the beginning of this year.
Market participants are closely watching development of the talks between Russia and Ukraine, which could lead to a de-escalation and market stabilisation. However, the US has expressed scepticism over Russia’s promise to scale back military action in the Ukrainian capital of Kyiv.
Are you interested in learning more about what affects oil prices? Read on for analysts’ market outlook for global supply and demand and future crude oil prices.
Global supply demand outlook clouded by Russia-Ukraine crisis
According to the US Energy Information Administration’s (EIA) short-term energy outlook report published on 8 March, the average global consumption of petroleum and liquid fuels is expected to rise to 100.6m barrels a day (b/d) in 2022, up 3.1m b/d or 3% from 2021.
However, the EIA warned the forecast is subject to change as it was completed before the conflict in Ukraine intensified.
“The outlook for economic growth and oil consumption in Russia and surrounding countries is highly uncertain. Oil consumption will depend on how economic activity and travel respond to recent and any potential future events and sanctions.”
Despite factoring in lower Russian oil production in its forecast, the EIA projects the global oil inventories will build at an average rate of 0.5m b/d from Q2 2022 through the end of 2023. The inventories are expected to put downward pressure on crude oil prices.
“However, if production disruptions — in Russia or elsewhere — are more than we forecast, resulting crude oil prices would be higher than our forecast,” warned EIA.
The average crude oil production in the US is expected to rise to 12.0m b/d in 2022 and hit a record-high at 13.0m b/d in 2023. The previous annual-average record production was 12.3m b/d in 2019, according to EIA.
The EIA forecast Brent crude oil prices could average at $117 per barrel (bbl) in March, $116/bbl in the second quarter and $102/bbl in the second half of the year. It expected the average Brent crude prices at $105.22/bbl in 2022 and falling to $89/bbl in 2023.
The average WTI crude oil prices were projected at $101.17/bbl in 2022 and $84.98/bbl in 2023.
WTI is the benchmark crude for North America while Brent crude oil is traded internationally with varying delivery locations. The Brent crude futures are traded on the Intercontinental Exchange (ICE).
However, the EIA said its predicted oil prices are “highly uncertain” as the “actual price outcomes will be dependent on the degree to which existing sanctions imposed on Russia, any potential future sanctions, and independent corporate actions affect Russia’s oil production or the sale of Russia’s oil in the global market.”
Additionally, responses from other oil producers to the current prices and macroeconomic developments are also key drivers of oil prices in the coming months, said EIA.
OPEC raises oil production from April onwards
The Organisation of the Petroleum Exporting Countries (OPEC) has agreed to raise oil production in April to meet rising global demand.
According to the OPEC meeting on 2 March, members and non-members have reaffirmed their agreements to raise monthly overall oil output by 0.4m barrels/day in April. The targeted oil production in April is 41,694m b/d for the 20 OPEC+ member countries.
“The current oil market fundamentals and the consensus on its outlook pointed to a well-balanced market, and that current volatility is not caused by changes in market fundamentals but by current geopolitical developments,” said OPEC.
According to the EIA’s forecast, OPEC crude oil production is expected to rise to 34.44m b/d in 2022, up 8.8% from the prior year. OPEC output is forecast to grow further to 34.66m b/d in 2023.
Oil price predictions 2025-2030
The Russia-Ukraine conflict has sparked an energy crisis in Europe with natural gas prices hitting record highs. In response, the EU has proposed a plan to expedite the trading bloc’s transition to renewable energy to cut its reliance on Russian fossil fuels.
Commission president Ursula von der Leyen said:
“We must become independent from Russian oil, coal and gas. We simply cannot rely on a supplier who explicitly threatens us. We need to act now to mitigate the impact of rising energy prices, diversify our gas supply for next winter and accelerate the clean energy transition. The quicker we switch to renewables and hydrogen, combined with more energy efficiency, the quicker we will be truly independent and master our energy system.”
Russia is a major supplier of natural gas in Europe, accounting for about 45% of the EU’s total imports. Russia also supplies 25% of the EU’s oil imports. The EU plans to phase out Russian fossil fuels well before 2030 by diversifying the continent’s energy sources – including higher liquefied natural gas (LNG), pipeline imports from non-Russian suppliers, and renewable energy sources – and increasing energy efficiency.
As a result, some expect demand for fossil fuels could fall in the medium-to-long-term, leading to a lower oil price in 10 years’ time. Consequently, the oil price in 2030 is widely expected below $100/bbl.
According to EIA’s annual energy outlook 2021 report, the agency held a conservative outlook for its oil price forecast 2030. It expects the average Brent crude prices at $61/bbl in 2025, $73/bbl in 2030, $80/bbl in 2035, $87/bbl in 2040, $91/bbl in 2045 and $95/bbl in 2050.
In April 2021, energy consultancy Wood Mackenzie said if the global fuel consumption falls in-line with the emission targets set to limit global warming, oil price projections in 2030 could fall as low as $40/bbl.
How do you invest in oil?
Investors can bet on the direction of crude oil prices through futures, options, exchange-traded derivatives, energy equities and sector mutual funds. All these investment products involve exposure to oil prices and will incur risks. This can be bought through online brokers or a full-service broker.
Note that analysts’ long-term oil price forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.
Is oil a good long-term investment?
Oil is a commodity that is essential to power much of the world’s transportations and manufacturing. However, whether oil is the right investment for you depends on your investing goals and portfolio composition. You should do your own research and never invest what you cannot afford to lose.
Should you invest in oil?
You can invest in oil through several products that can be purchased from online or full-service brokers. Whether you should invest in oil is a decision only you can make. You should do your own research. And never invest what you cannot afford to lose.
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