Oil prices have dropped in 2025 to their lowest levels since 2021. Seasoned analysts are not surprised. It is a combination of global economic downturn, trade wars, and rising oil supply that has unsettled the market.
Crude Oil Drops Despite Brief Rally
West Texas Intermediate (WTI) crude has fallen more than 10% this year. Even a 9% relief rally was not enough to prevent a 3% decline in April. The decline gained steam after President Trump’s “Liberation Day” tariff announcement on April 2, which reignited global trade concerns.
Those tariffs, especially the 145% increase on Chinese imports, spurred rumors of a global economic slowdown. Most anticipated lower oil demand as companies. Because companies are preparing for increased expenses and consumers tighten their belts.
Carley Garner’s Bearish Prediction Proves Right
This had been foretold by veteran commodities expert Carley Garner. The oil market had a lack of speculative fervor and was prone to declining prices in December. Her prediction was correct because crude dropped below $60 a barrel early in April.
Now, Garner believes the recent uptick is temporary. “We’re very well supplied,” she told TheStreet. “Unless sanctions are enforced strictly, crude prices could continue to fall. We’re likely to see lower highs and lower lows.”
Economic Headwinds Drive Prices Lower
The U.S. economy is struggling. Last summer, it clocked a 3% GDP growth rate. Now, numbers indicate it’s slowing down. Inflation remains higher than the Fed’s 2% threshold, jobs are fewer to be had, and consumer confidence is eroding.
In March, the ISM manufacturing PMI dropped to 49, signaling contraction. The services index slipped too, down to 50.8. Open job positions have declined by nearly 900,000 in a year. Layoffs are the highest since 1989.
All these signs point to an economic cool-down and not a great recipe for rising oil prices. Sluggish activity typically reduces energy demand, leading to excess supply and falling prices.
Tariffs Add Pressure on Global Demand
Global trade disruption is pouring oil onto the fire. New imports from Canada, Mexico, China, and Europe with added tariffs are raising the costs across all sectors. Demand from one of the world’s largest energy users might plummet, since China now pays a 145% tariff.
The International Energy Agency (IEA) lowered its 2025 estimate of global oil demand growth by 300,000 barrels a day. The outlook is now even weaker at just 730,000 barrels a day. The outlook for 2026 is dimmer still.
OPEC’s Surprise Supply Boost Weighs Heavily
In a shocking turn of events, OPEC committed to increasing production by more than 400,000 barrels per day in May. The move is made at a time when demand is weakening and a disparity could put additional downward pressure on prices.
“More supply during dwindling demand isn’t bullish,” IEA analysts said in their latest oil market report. Garner too said the same: “Every rally is getting sold into. If crude breaks below $65 and holds, the next stop might be the low $50s.”
Investor Outlook: More Pain Ahead?
With sticky inflation, weakening jobs, and consumer sentiment at a 12-year low, investors are cautious. The Federal Reserve has ceased rate cuts after easing inflation progress. That translates to less economic stimulus and increased market uncertainty.
Analysts caution that if trade tensions do not ease and economic indicators do not improve, oil can remain under pressure until the remainder of 2025. In the meantime, caution prevails in black gold sentiment.
Conclusion: A Market on Edge
The future of crude oil depends on geopolitics, supply restraint, and the recovery of the economy. Short-term rallies are possible, but overall, the trend is bearish. Garner’s prognosis is that the future may be a slow, stair-step decline.
To date, investors in oil need to prepare for more volatility and perhaps, further losses.
