Crude oil: Bearish long-term outlook, WTI to hit $60 by Q4CY25, say analyst

Oil Market Outlook: Tariffs, Surplus, and Geopolitical Tensions Shape Crude Dynamics

Since the conclusion of the Iran-Israel conflict, oil prices have retreated and stabilised within a broader trading range of around $6 per barrel. West Texas Intermediate (WTI) crude began trading at approximately $73–76 per barrel in late May and has since declined to about $63.75 as of August 28, 2025. This marks a drop of roughly 15–18 per cent over the period. On a monthly basis, WTI fell 3.5 per cent, and is down over 7 per cent year-to-date. However, due to renewed geopolitical tensions, prices have risen 6 per cent over the past three months, reflecting short-term volatility.

Tariff Pressures on the Indian Economy

India, with a GDP estimated between $3.8–4.0 trillion in 2025, faces mounting economic pressure from newly imposed tariffs. A 50 per cent tariff for buying Russian oil could shave off 50–90 basis points from GDP, depending on how long these measures persist and how effectively Indian exporters diversify. Adding to the strain, President Trump’s 50 per cent tariffs on Indian goods, effective from August 27, could reduce India’s Russian oil imports by 20–40 per cent, potentially displacing 0.5–1 million barrels per day (b/d) of global Russian crude flows. This shift may push India toward alternative suppliers like the Middle East, but the broader impact could dampen the country’s consumption-driven growth narrative.

Rising Crude Oil Supplies from OPEC+

OPEC+ continues to ramp up production, reversing its two-year-long output cuts. In July 2025, the group produced 41.94 million b/d, an increase of approximately 335,000–380,000 b/d from June. Nigeria’s output alone rose to 1.71 million b/d, its highest since January. Over the past four months, OPEC+ has added a net 670,000 b/d, with average production around 41.5 million b/d. The alliance aims to restore a total of 2.2 million b/d by September 2026, although 1.66 million b/d of capacity remains offline until late next year. Given these trends, the market is expected to end 2025 with a surplus exceeding 1 million b/d.

Geopolitical Risks and Russian Crude Flows

Despite the bearish supply outlook, crude prices continue to find support from geopolitical risks. The ongoing Russia-Ukraine war is likely to maintain restrictions on Russian crude exports. US sanctions and tariffs on India appear to be indirectly affecting Moscow’s oil flows, with weekly shipments from Russian ports dropping to a four-week low of 2.72 million b/d. Historically, US sanctions have had mixed effects—while they reduce revenues through discounts and rerouting, they haven’t drastically cut export volumes due to shadow fleets and demand from Asian buyers. Nonetheless, sustained pressure could eventually weigh on global prices.

US Crude Production and Inventory Trends

In the US, crude oil production rose by 0.4 per cent week-over-week to 13.439 million b/d as of August 22, slightly below the record high of 13.631 million b/d set in December 2024. However, production in the Permian Basin—which accounts for 45–46 per cent of US output—is plateauing. This has contributed to slower inventory replenishment, with current stockpiles 5.2 per cent below the seasonal five-year average. While US output remains strong, the plateauing trend could limit upside potential in the near term.

Outlook: Volatility in the Short Term, Bearish in the Long Run

The short-term outlook for oil remains volatile, driven by geopolitical rifts in the Middle East and stalled peace talks between Russia and Ukraine. These factors could tighten supply and support prices temporarily. However, the long-term trajectory appears bearish, with WTI crude expected to approach $60 per barrel in Q4 2025. Rising global supplies, tariff-induced demand shifts, and plateauing US production suggest a market heading toward surplus and softer prices.    ============  Disclaimer: Mohammed Imran is a research analyst at Mirae Asset Sharekhan. Views expressed are his own.