Richmond Lee, CFA and Senior Market Analyst at PU Prime, commented:
"Oil prices remain caught between bearish structural drivers and short-term geopolitical risks. Longer-term pressures such as rising electric vehicle adoption and expectations of higher supply continue to weigh on sentiment.
At the same time, renewed tensions in the Russia-Ukraine conflict are injecting volatility. Reports of drone strikes on the Kursk nuclear power plant in western Russia have heightened uncertainty, even as U.S. President Donald Trump pursues ceasefire discussions. These developments highlight the fragile nature of the geopolitical backdrop, with diplomatic progress or escalation likely to drive oil price swings in the near term.
With fundamentals leaning toward oversupply but geopolitics keeping risk premiums elevated, crude oil is expected to remain range-bound until clearer direction emerges. Traders should watch ceasefire negotiations and U.S. energy updates closely for potential catalysts."
The biggest disagreement is about how much oil the world will use next year. The IEA thinks global oil demand will grow by just 680,000 barrels per day (b/d) in 2025. OPEC believes demand will grow almost twice as fast -- by 1.3 million b/d. The EIA sits in the middle, with a forecast of 980,000 b/d.
This matters for prices. The EIA expects Brent crude to fall from $71 in July 2025 to $58 by the end of the year, and even lower in early 2026 -- possibly to $50. That's because the EIA sees oil supply rising faster than demand, which could lead to large stockpiles of unused oil.
The IEA agrees with that view, expecting global oil inventories to grow by hundreds of thousands of barrels per day over the next two years. OPEC disagrees and says the market could actually face a shortage in early 2026.
OPEC Boosts Output, Adding Downward Pressure
In August, OPEC made a surprise move by increasing oil production faster than expected. It plans to fully end its voluntary supply cuts by September 2025, a full year earlier than planned. In September alone, it's adding over 500,000 b/d to the market.
OPEC says it is doing this to prevent future shortages. It claims that inventories are already low and bringing more oil to market now is a smart move. But critics say this could make oversupply worse in the short term and push prices down further.
This supply boost is one reason why traders are leaning bearish for the next few quarters.
Forecast Methods Are Causing Confusion
One reason for the disagreement is that the agencies use different methods to create their forecasts. The IEA has changed its past demand estimates several times this year. That has made its future projections less stable. OPEC and the EIA have made fewer changes.
There's also a big difference in how they view China. The IEA expects China to add only 90,000 b/d in new demand in 2025, mainly because of electric vehicles and public transport. OPEC and the EIA both expect over 200,000 b/d, saying China's demand is still strong.
The same split exists for developed countries like the U.S. and Europe. The IEA expects demand to fall. OPEC sees small gains. These disagreements make it harder for traders to trust any single forecast.
Oil Prices Forecast: Bearish in the Short Term
With more oil coming to market and agencies expecting slower demand, the short-term forecast leans bearish. The EIA's price outlook is especially weak, and OPEC's added supply only adds to that concern.