Oil Prices Take a Historic Plunge: Implications for Investors and Businesses in Oman
Oil Prices Decline Marking Significant Annual Losses
London/New York: Oil prices fell sharply on Wednesday, concluding the year with nearly a 20% annual loss. This downturn is attributed to growing concerns of oversupply amidst ongoing geopolitical conflicts, increased tariffs, elevated output from OPEC+, and sanctions imposed on Russia, Iran, and Venezuela.
Brent crude futures saw a decline of approximately 19% in 2025, marking the most significant annual percentage drop since 2020, and it represents the third consecutive year of losses—making it the longest streak on record. Meanwhile, US West Texas Intermediate crude reported an annual decline of nearly 20%.
On the year’s final trading day, Brent futures settled at $60.85 a barrel, down 48 cents or 0.8%. US WTI crude fell by 53 cents or 0.9%, closing at $57.42 a barrel.
BNP Paribas commodities analyst Jason Ying forecasts a further dip in Brent prices to $55 in the first quarter of 2026, followed by a recovery to $60 for the remainder of the year, as supply growth stabilizes and demand remains flat. “We are more bearish in the near term because US shale producers have successfully hedged at high levels, leading to a more consistent supply insensible to price fluctuations,” he remarked.
US crude inventories dropped last week; however, both distillate and gasoline stocks rose more than anticipated, as reported by the US Energy Information Administration (EIA). Crude inventories fell by 1.9 million barrels to 422.9 million barrels for the week ending December 26, contrary to analysts’ expectations of an 867,000-barrel reduction. Gasoline stocks increased by 5.8 million barrels to 234.3 million barrels, against forecasts for a 1.9 million-barrel rise, while distillate stockpiles, which include diesel and heating oil, rose by 5 million barrels to 123.7 million barrels, surpassing expectations of a 2.2 million-barrel increase.
October saw US oil production hit a record high, according to the EIA’s latest data.
The oil markets had a robust start in 2025, following former President Joe Biden’s implementation of stricter sanctions on Russia, which affected supply to major consumers like China and India. The ongoing war in Ukraine further complicated energy markets, particularly when Ukrainian drones targeted Russian infrastructure, impacting oil exports from Kazakhstan.
Additional supply threats arose from the 12-day Iran-Israel conflict in June, which disrupted shipping routes in the Strait of Hormuz, a critical channel for global oil transport, driving prices upwards.
OPEC+, comprising the Organization of the Petroleum Exporting Countries and allied producers, has decided to pause output increases for the first quarter of 2026 after injecting approximately 2.9 million barrels per day into the market since April. The next OPEC+ meeting is scheduled for January 4.
Most analysts anticipate that supply will outpace demand in the coming year, with estimates varying from the International Energy Agency’s forecast of 3.84 million barrels per day to 2 million bpd according to Goldman Sachs.
“If prices experience a significant decline, it is likely that OPEC+ will implement cuts,” expressed Martijn Rats, global oil strategist at Morgan Stanley.
John Driscoll, managing director at consultancy JTD Energy, suggests that while market fundamentals indicate an oversupply, geopolitical risks may still sustain oil prices. “Many predict a weakening trend into 2026 and beyond,” he stated. "However, I would not overlook geopolitical factors, particularly the influence of former President Trump, who is keen to remain involved." — Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The recent decline in oil prices poses significant challenges for businesses in Oman, particularly those reliant on oil revenue. With anticipated oversupply and stagnant demand, smart investors should consider diversifying investments and exploring alternative energy sectors to mitigate risks. Additionally, seizing opportunities in renewable energy and technology can position entrepreneurs for future growth in a shifting market landscape.
