Global oil markets have experienced their most dramatic annual decline since the pandemic crisis, with prices plummeting nearly 20% throughout 2025. This represents an extraordinary milestone as the first time the energy sector has endured three consecutive years of falling prices, creating unprecedented challenges across the producing industry.
Despite ongoing geopolitical tensions in several major oil-producing regions worldwide, prices have continued their downward slide due to severe oversupply fundamentals. Producers are pumping substantially more crude than global economic activity requires, creating what market observers characterize as cartoonish levels of excess supply. This glut has overwhelmed traditional market dynamics that typically balance pricing.
Progress toward ending the Russia-Ukraine conflict pushed crude below $60 per barrel last month for the first time in almost five years. This development raised market fears that removing western sanctions on Russian energy could flood an already oversaturated market with additional supplies, potentially accelerating the price decline in upcoming months.
The year concluded with Brent crude at $60.85 per barrel, representing a steep drop from nearly $74 at the end of 2024. U.S. benchmark prices mirrored this trajectory, falling to $57.42. The OPEC cartel typically attempts to manage member production to keep prices high enough for healthy revenues without becoming so elevated that consumers switch to low-carbon alternatives, but this strategy has failed against current market realities.
Disappointing economic growth in major markets combined with trade war impacts have dampened demand from China, the world’s primary energy consumer. International energy officials estimate supplies will outstrip demand by approximately 3.8 million barrels daily this year, even after OPEC deferred production increases. Major investment banks anticipate further erosion, with some projecting prices could reach $55 per barrel by spring or fall into the $50s during 2026. Lower fuel prices could benefit struggling families and help cool inflation, though retailers face pressure to pass savings to customers more quickly, and household energy bills are rising slightly despite the crude price crash.