Employees operate a drilling rig at the Airankol oil field operated by Caspiy Neft in the Atyrau Region, Kazakhstan August 22, 2024. REUTERS/Pavel Mikheyev/File Photo
KUALA LUMPUR: BMI, a unit of Fitch Solutions, has maintained its 2025 forecast for Brent crude at an average of US$76 per barrel (bbl), slightly lower than the average of US$80/bbl in 2024.
In its oil price outlook report released today, it noted that prices have been trending lower during the first few weeks of US President Donald Trump’s administration. The front-month contract has dropped from its year-to-date high of US$82/bbl at the January 15 close to below US$73/bbl as of March 3, 2025.
"Market participants are struggling with the impact of the wave of energy-related policy announcements from the Trump administration this month. However, those policies leaning towards downside risks, particularly US tariff measures, are currently winning out," BMI added.
It said that given the intensity of the Trump news cycle, it is perhaps surprising that the swings in market positioning and, relatedly, price volatility, have not been greater.
However, it noted that this likely reflects the challenges investors face in making high-conviction decisions amid such a mercurial policy backdrop.
"From an oil market perspective, the most significant policies this year are expected to involve oil-related sanctions and trade tariffs. In terms of sanctions, the greatest potential disruption comes from Iran, with over 1.5 million barrels per day(bpd) of exports at risk due to Trump’s renewed ‘maximum pressure’ campaign.
"However, despite the rhetoric, the recent sanctions imposed by the Trump administration have been relatively ineffective. So far, 11 individuals, 26 entities, and 16 vessels involved in the Iranian oil trade have been sanctioned," BMI added.
OPEC+ Holding the Line
BMI said OPEC+ has adequate spare capacity to offset any potential losses due to the US sanctions against Iran and Venezuela.
However, given the considerable sacrifices it has made in support of oil prices over recent years, the group will likely be comfortable with Brent ranging higher from its current levels, it added.
At its February meeting, OPEC+ stuck to its current schedule, with oil production hikes beginning in April, at 138,000 bpd, excluding compensation cuts..
"If prices continue their downward trend, it becomes increasingly likely that the group intervenes again, delaying the increase in its output," BMI said.
Rising Tariff Rates Pose a Threat to Oil Demand
There are also a number of tariffs on the energy sector itself.
BMI said Mainland China’s 10 per cent tariff on US crude imports should not significantly disrupt the market, given limited crude oil trade between the two markets.
From the standpoint of the energy market, the largest potential disruption arises from tariffs on Canada, it added.
"Although most major importers obtain their crude oil from a variety of suppliers, the US is heavily dependent on Canadian oil, which comprised over 60 per cent of its total crude imports in 2024.
"The fact that Trump provided an exemption for energy, lowering the tariff rate from 25 per cent to 10 per cent, indicates his administration's recognition of the potential threat to the US energy market," BMI said. - Bernama
