Oil prices edged lower on Friday as market concerns grew over a potential supply surplus in 2025, despite optimism regarding increased demand from major oil consumers such as the US and China.

The international benchmark Brent crude dropped 0.15% to settle at US$73.20 per barrel by 10:19 a.m. local time (0719 GMT), compared to the previous close of US$73.31. Similarly, West Texas Intermediate (WTI) declined 0.11% to US$69.71 per barrel from its prior session price of US$69.79.

According to the International Energy Agency (IEA), global oil supply is expected to rise by 1.9 million barrels per day (bpd) to 104.8 million bpd in 2025, driven by non-OPEC+ producers, despite ongoing production cuts from OPEC+ members. Global oil demand, however, is anticipated to increase by only 1.08 million bpd to 103.9 million bpd, potentially leading to a supply surplus of nearly 900,000 bpd.

Additionally, a strengthening US dollar contributed to the downward pressure on oil prices. As the dollar gains value in anticipation of interest rate cuts, oil prices—pegged in US dollars—become more expensive for buyers using other currencies. The US dollar index, which measures the greenback against a basket of major currencies, rose 0.14% to 106.84.

Despite these challenges, demand prospects from the US and China helped limit losses. Analysts expect global economic recovery in these regions to underpin oil prices, though volatility is likely as markets monitor geopolitical events and monetary policy changes.

Brent crude and WTI prices are expected to remain sensitive to shifts in demand and production dynamics, as well as fluctuations in currency values.

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