Crude oil futures pulled back on Tuesday after a strong start to 2025. Oil prices have found support in various places, from the extreme cold blanketing much of North America and Europe to President Joe Biden’s sweeping sanctions. But a new government report suggests that the good times may not last for energy investors.
February West Texas Intermediate (WTI) crude oil futures tumbled $1.05, or 1.33%, to $77.77 a barrel at 18:47 GMT on Tuesday on the New York Mercantile Exchange. US crude is up 8% this year and has risen 11% over the past month.
Brent, the global benchmark for oil prices, struggled to hold $80 on London’s ICE Futures exchange. March Brent crude fell $0.84, or 1.04%, to $80.17 a barrel on Tuesday. Brent is up 7% this year and has climbed 8.5% over the last month.
Oil prices have been trading at their highest levels since August.
Traders are combing through the Energy Information Administration’s latest Short Term Energy Outlook (STEO) report. It concluded that the latest increase in oil prices would likely be temporary as higher output could send oil prices to fall.
“Following some initial upward price pressure in early 2025, we expect that crude-oil prices will generally decline from mid-2025 through the end of 2026 as growth in global oil production outpaces growth in oil demand,” the EIA said Tuesday in its Short Term Energy Outlook.
The EIA projects that WTI prices are anticipated to average $70 in 2025, down from $77 in 2024. They could also fall to $62 per barrel in 2026. Brent will average about $74 per barrel this year, down from $81 billion in 2024. Next year, Brent is forecast to average $66 per barrel.
Oil prices have rallied on expectations that the US administration’s sweeping sanctions on Russia could redirect trade flows and impact global energy markets, resulting in higher prices. Of course, this would also lead to renewed inflationary pressures.
“China and India, which have been the main buyers of Russian oil to date, must therefore look for alternative suppliers if they do not want to violate U.S. sanctions. Indian refineries are reportedly already reluctant to accept oil deliveries from Russia,” said Carsten Fritsch, commodities strategist at Commerzbank, in a Tuesday note.
Others say that markets could ignore the sanctions and Russia could adapt to the situation.
Meanwhile, there was little action in other energy markets. February natural gas futures were flat at $3.43 per million British thermal units (Btu), February gasoline futures were little changed at $2.11 a gallon, and February heating oil was unchanged at $2.53 per gallon.