Key Points
- Oil prices are down 17% in 2025, the biggest annual drop since 2020.
- A global surplus of 2 million barrels per day is expected to continue into 2026.
- OPEC+ increased production this year to compete with rising output from the U.S. and Brazil.
- China has been buying up the extra oil for storage, which has helped support prices.
Oil is on track for its worst year since the start of the pandemic, with prices down about 17% in 2025. Brent crude is currently trading just above $61 a barrel, and a massive global surplus is expected to keep prices low well into 2026. This year has been defined by a strange mix of rising geopolitical tensions and even faster-rising oil supplies.
The world is currently swimming in oil. Both the International Energy Agency and the U.S. government estimate that production exceeds demand by more than 2 million barrels per day. A major reason for this glut is that the OPEC+ group, which includes major producers such as Saudi Arabia and Russia, changed its strategy this year.
Instead of cutting production to keep prices high, they began pumping more oil to regain market share from new entrants such as Brazil, Guyana, and the United States, which are now producing at record levels.
This oversupply has been beneficial for the global economy. Lower oil prices mean lower gas prices, which help cool inflation. The U.S. Federal Reserve even cut interest rates three times this year, partly because the pressure from energy costs has eased. However, it’s bad news for the oil companies and countries that depend on high prices to balance their budgets.
Despite the substantial surplus, several factors have prevented prices from falling further. China has been buying up a lot of the extra oil and putting it into storage tanks. This keeps it off the open market and helps support prices.
At the same time, the U.S. is seizing tankers carrying Venezuelan oil, and there are ongoing risks of conflict with Iran and Russia. These geopolitical wild cards have put a “floor” under the market, preventing a total collapse.
For now, traders are monitoring what OPEC+ will do at its next meeting and how President Trump’s policies will continue to shape the global energy landscape.
