Why oil prices are expected to fall in 2025?
Crude oil prices may drop below $60 per barrel, predicts S&P Global Commodity Insights. The outlook for global energy markets is changing as a result of a combination of peaking U.S. production, weak global demand, and rising supply.
Premasish Das, Executive Director for Oil Markets Research and Analysis, S&P Global Commodity Insights. (Photo Credit: Puneet Wadhwa)
The Main Causes of Declining Oil Prices
The following factors are fueling the pessimistic crude oil forecast:
• An increase in OPEC+ output
The group is adding excess supply to the market by progressively resuming production of 2.2 million barrels per day.• A slower rate of global demand
There is an excess of oil since major economies like the U.S. and China are using less of it than anticipated.• The decline in U.S. production
Although it might not be sufficient to offset the weak demand, a predicted 600,000 barrel per day decline in U.S. output from mid-2025 to mid-2026 could change the market balance.
• Aspects of Geopolitics
Although they are unlikely to stop the overall downward trend, conflicts like the one between Israel and Iran may cause brief price spikes.
Long-Term vs Short-Term Prospects
Duration of the Anticipated Crude PriceImportant Drivers
H2 2025: OPEC+ supply, low demand, $5–60 per barrel
Early 2026: $50 to $55 or lessLong-term surplus and low geopolitical risk
Risk scenariosFall below $50If the global economic recovery stalls
Effect on the Economy of India
One of the biggest importers of crude oil worldwide is India . There are several financial benefits to a drop in oil prices.
1. Lower Import Bill: Over 80% of India's crude needs are imported; a $10 drop in price per barrel can result in billions of dollars in foreign exchange savings.
2. Reduced Inflation: Lower fuel prices ease the financial strain on transportation and food by assisting in the control of CPI and WPI.
3. Government Savings & Fiscal Flexibility: The ability to lower excise taxes or devote money to infrastructure, strategic reserves, or renewable energy.
4. Encouragement of Indian Industries Benefiting industries include: FMCG and heavy industries, paints and chemicals, aviation and logistics, and oil refining and marketing companies (OMCs).
5. Currency Strength: A stronger rupee, a better trade balance, and increased investor confidence are all results of lower imports.
Companies and Industries That May Benefit
• Refining margins of OMCs (Oil Marketing Companies, ia, IOCL, BPCL, HPCL) are likely to improve.
• Automotive and Aircraft
Cheaper fuel costs will facilitate increasingly profitable operations with reduced operating costs.
• Paint, Chemical, and Fast-Moving Consumer Goods Companies
Decreasing input costs will improve their pricing power and allow them to increase margins.
Risks to Keep an Eye On
• Middle East Conflicts - any major escalation in Iran and Israel, or surrounding areas, may return prices to an upward trend.
• OPEC+ Policy Change - unexpected production cuts could quickly draw supply down.
• Demand Recovery from China- a faster than expected recovery from China may lead to prices stabilizing or rising.
Also read article for : Jio Financial's share
Will crude oil prices stay low in india?
How low oil prices help India’s economy:
• Rebuild strategic crude reserves
• Strengthen the rupee and reduce debt burden
• Boost manufacturing sectors reliant on fuel
• Accelerate investment in clean energy alternatives
Wrap Up
Falling oil prices have mixed global implications; nevertheless, oil price declines could likely be beneficial for India. Lower energy costs, better trade balances and inflation relief may all contribute to sustainable growth in the economy through 2025 and beyond.
Again, staying alert to the impact of globally uncertain circumstances, particularly shifts in geopolitical situations, and policies, will be paramount.
Leave a Reply