Reviewing the 2025 Crude Oil Market -Many Unexpected Factors

This feature looks back on the key factors and events that influenced the crude oil market in 2025, and examines the outlook for 2026. It summarizes perspectives from six analysts at financial institutions and think tanks, as well as independent analysts and other experts.

Several analysts described the 2025 crude oil market as "largely within expectations." However, many also pointed out that "there were numerous unexpected developments." Among the unanticipated factors were OPEC plus's expansion of production increases, geopolitical risks related to Ukraine and the Middle East, and tariff actions by the US Trump administration.

Tomomichi Akuta, Senior Economist at Mitsubishi UFJ Research and Consulting, commented that geopolitical factors and trade friction caused "continued volatility in crude oil prices, although not to an abnormal extent, and market participants responded calmly." According to him, although the forecast range was generally within expectations, the pace of OPEC Plus production hikes, the impact of US trade policy, and the US military's airstrikes on Iran were unforeseen drivers of market fluctuations

Takayuki Nogami, Chief Economist at Japan Organization for Metals and Energy Security (JOGMEC), noted that although there were moments of sharp ups and downs, "The price movements generally stayed within the expected range, and no sustained trend was observed." However, prices did drift below the initially projected range. He said that the continuation of fighting between Ukraine and Russia, the tariff policies of US President Trump and his calls for interest rate cuts by US monetary authorities, and US pressure on Iran were all anticipated. Despite significant production increases by OPEC Plus and maximum pressure on Iran by President Donald Trump, "These moves had only a limited impact and production volumes by Iran hardly decreased," said Mr Nogami.

Some analysts observed that the crude oil market in 2025 lacked clear direction. Tsuyoshi Ueno, Chief Economist at the NLI Research Institute, summarized that it was "a year in which numerous unpredictable factors overlapped," including trade tariffs imposed by Donald Trump, the scaling back of OPEC Plus production cuts, and geopolitical risks involving Ukraine and Iran. These factors affected both the supply side and the demand side. While the annual price range was roughly as predicted, he pointed out that "the average price level was closer to the lower end of the assumed range." He cited "the rapid and continued reduction of production cuts by OPEC Plus" as the most unexpected events and mentioned that this softened prices more than anticipated. The unexpectedly large scale of the Donald Trump tariffs and the direct attacks on Iranian nuclear facilities by Israel and the US were also unforeseen.

Meanwhile, Naohiro Niimura, Co-CEO, Market Risk Advisory, had expected prices to rise from spring amid a gradual economic recovery. However, economic activity virtually halted for about nine months due to the impact of Trump tariffs. As a result, "The economy slowed down and price levels were pushed downward. It was a year that was largely affected by the impact of the tariff policy," he concluded. He added with a wry smile, "I expected crude prices to fall on recession concerns, but after that, most of my forecasts were not realized." The unexpectedly large impact of the Trump tariffs and Israel's sudden military actions were also surprises.

Yuki Takashima, Economist at Nomura Securities, noted that after three postponements since September 2024, OPEC Plus finally began reversing voluntary production cuts on April 1, 2025, and then decided on additional emergency production increases on April 3. As a result, "Expectations grew that supply/demand conditions would soften going forward." Although the acceleration of the production increase in April was unexpected, he said that "The direction toward increasing production and the resulting downward pressure on crude prices were consistent with expectations."

The view that OPEC Plus could promptly decide to increase production during emergencies also took hold, and even as tensions rose between Iran and Israel in June, WTI crude did not exceed the January 2025 high of $80.77. Since then, OPEC Plus production increases and concerns about future economic weakness due to higher US tariffs have kept crude prices on a downward trend.

Tetsu Yoshida, Commodity Analyst at Rakuten Securities Economic Research Institute, reflected that prices "slightly dipped below the lower bound of the expected range." While somewhat weaker than initially forecast, he concluded that prices "held up relatively well without collapsing." WTI crude was expected to be traded between $60 and $100, but in reality stayed mostly between $55 and $80. Despite multiple bearish factors, he believes the market "held its lower range reasonably well."

Overall, several events such as Trump tariffs, US interest rate cuts, OPEC Plus, the Ukraine war, and Middle East tensions repeatedly generated upward and downward pressures at different times throughout the year. As a result, "As both upward and downward pressure was factored in, the market prevented any major surges or crashes."

One of the most unpredictable factors, he added, was the negative impact of the Trump tariffs. April saw a sharp drop dubbed the "shock" phase of the year. While the tariff dispute was expected to intensify mainly between the US and China, as in Trump's 2017-2020 first term, it instead developed into mutual tariffs involving many countries. Compared to the first term, the negative effects were greater, leading to concerns about a global economic slowdown and rekindling inflation fears within the US. This in turn "reduced expectations for interest rate cuts and heightened concerns about economic deterioration," strengthening downward pressure. The US had been moving toward rate cuts since 2024, raising hopes for "rate cuts → easier financing → economic recovery → increased demand," but the introduction of mutual tariffs shifted the mood from optimism to concern, and "increased downward pressure on prices," said Mr Yoshida.