Oil markets have recorded their steepest annual fall since the Covid pandemic and could be on track to plummet further as oil producers continue to pump more crude than needed by the global economy.
Oil prices slumped by almost 20% in 2025, marking the biggest annual loss since 2020 and the first time that the oil market has recorded three consecutive years of annual losses.
On the last day of 2025, the price of Brent crude settled at $60.85 a barrel, down sharply from almost $74 a barrel at the end of 2024. The US oil price also fell 20% last year, to $57.42 on Wednesday from about $74 a year ago.
The steady slide in prices has emerged despite ongoing conflict in some of the world’s most important energy-producing regions due to a “cartoonishly” oversupplied market, according to analysts.
Crude fell below $60 a barrel for the first time in almost five years last month as political leaders began to inch towards a Russia-Ukraine peace deal which could increase the glut in the global market if Western sanctions are lifted on Russian exports.
The International Energy Agency expects supplies to outstrip demand for crude by about 3.8m barrels a day this year, even following a recent decision by members of the Organization of Petroleum Exporting Countries (OPEC) oil cartel to defer any increase in production until after the first quarter of the year.
OPEC normally tries to manage the output of its members to keep prices within a “Goldilocks” range: high enough to guarantee them healthy revenues, but without becoming so high that consumers take up cheaper, low-carbon alternatives such as electric cars and heat pumps.
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