In recent days, the price of Brent crude oil has surpassed the $82-per-barrel mark. European Natural Gas prices are also showing a rise due to the quickening depletion of reserves and Ukraine’s decision to stop the transit of Russian gas. The future outlook for these commodities largely depends on geopolitical developments, decisions made by OPEC and weather conditions, writes eToro analyst for Romania, Bogdan Maioreanu.
When the US recently announced additional sanctions targeting the Russian oil industry, oil prices suddenly rose by 4%. It is not unimaginable that a newly agreed ceasefire could lead to a reduction in sanctions and a subsequent drop in oil prices.
President-elect Donald Trump will be inaugurated today (Monday) and has declared that he would “end the war between Russia and Ukraine in one day.” Although such a scenario seems unlikely, both sides appear increasingly willing to begin negotiations. In this context, it is worth recalling what happened in September 2014, when the first Minsk agreement established a ceasefire in the Donbas region. At that time, the impact on oil prices was significant—the price of Brent crude dropped from $110 to $35 per barrel between May 2014 and January 2016. This also led to substantial declines in the stock prices of oil-sector companies.
Domestically, Trump will likely want to demonstrate that he has swiftly reduced energy prices, which could positively impact controlling inflation, consumer spending, the competitiveness of US manufacturing and economy, and the replenishment of the strategic oil reserve, which was halved under Biden. Saudi Arabia, the leader of the OPEC group, appears open to negotiations with the new administration. However, in exchange for lower oil prices, it may demand access to advanced technologies, semiconductors, or defense equipment. At the same time, however, concerns may arise that the new tariffs announced by Donald Trump could also apply to oil from Canada, which could have the opposite effect and lead to price increases in the U.S. market.
The current situation in the oil market suggests a risk of oversupply, which could lead to price declines. Global inventories rose by 12.2 million barrels in November 2024, reaching 7.655 million barrels—a sign that there is still enough crude to meet existing demand. Refinery runs also hit a five-year high of 84.3 million barrels per day in December 2024, which may indicate a temporary saturation of the market. Expectations for 2025 predict that global oil demand will reach 104 million barrels per day, while world production is set to increase by around 1.8 million barrels per day.
Another important factor supporting oil prices in recent weeks has been the weather. We had freezing temperatures in North America, Europe, China, and Japan, significantly increasing demand for oil as heating fuel. Compared to previous years, the number of heating days was noticeably higher, which boosted forecasts of oil demand in OECD countries by an additional 250,000 barrels per day. If winter remains equally harsh, oil prices may stay at elevated levels.
The cold weather had its effect on natural gas prices too. The price of European natural gas started to climb in February 2024 but the beginning of 2025 has seen it reaching a maximum of over 50 Euro per MWh. This is no surprise as the gas storage facilities are depleting quicker than we have seen in 2023 and 2024. Romania still has reserves over 56% full but France, Croatia and the Netherlands are below 50%. The best situation is the one of Portugal which is at 100% followed by Sweden (88%), Spain (77.5%), Poland (77.4%), Italy (71.5%) and Austria (70.5%). While natural gas might still keep these elevated prices for a while, these are not even close to the ones we witnessed in August 2022 when it exceeded 339 Euro for MWh. In fact, contracts for winter 2025 are concluded at almost 45 Euro for MWh.
According to Copernicus – EU’s Earth Observation Programme – weather in February will favour windier, milder and wetter than average conditions in the north of Europe but warmer and drier than average in the southern parts of the continent. And this might translate into good news for the prices of oil and natural gas.
However, the oil price outlook for 2025 is mixed. On one hand, potential peace agreements and rising inventories could drive prices down; on the other, factors such as weather, sanctions, and logistical constraints may keep prices high. The situation remains dynamic, and the ultimate trajectory will be influenced by both political decisions and short-term supply disruptions.
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