The final trading day of 2025 brought little relief for oil bulls. Brent crude futures settled at $60.85 a barrel on December 31, down 0.8% on the day and capping a brutal 19% annual decline—the worst yearly performance since the pandemic-induced collapse of 2020.

West Texas Intermediate fared no better, falling 0.9% to close at $57.42 per barrel. For Brent, this marks the third consecutive year of losses, the longest such streak in the benchmark's recorded history.

A Year of Colliding Forces

The 2025 oil market was defined by a relentless tug-of-war between supply abundance and geopolitical disruption. On one side, rising production from non-OPEC nations—particularly the United States, Brazil, and Guyana—flooded markets with additional barrels. On the other, wars in the Middle East and Eastern Europe, alongside sanctions on Russia, Iran, and Venezuela, kept traders on edge.

But in the end, supply won decisively.

"The fundamental picture is unmistakably bearish," said Jason Ying, commodities analyst at BNP Paribas. "Even with geopolitical premiums baked in, the sheer volume of oil available on global markets overwhelmed demand growth."

The Supply Glut Deepens

The International Energy Agency's December report painted a sobering picture for producers. Global oil supply fell by 610,000 barrels per day in November, extending the decline from September's record 109 million barrels per day. OPEC+ accounted for over three-quarters of the decrease, led by sanctions-hit Russia and Venezuela.

Yet the IEA projects an even more challenging 2026:

  • 4 million barrels per day surplus expected next year
  • Sub-$60 Brent prices forecast for Q1 2026
  • Non-OPEC+ production growth continuing to accelerate

Russian Revenues Crater

Perhaps no producer felt the pressure more acutely than Russia. Urals crude prices plunged $8.20 per barrel to $43.52, dragging export revenues to their lowest level since Russia's invasion of Ukraine in February 2022. Western sanctions, combined with the broader price decline, have squeezed Moscow's petroleum revenues precisely when war costs remain elevated.

The Geopolitical Wildcards

Throughout December, geopolitics remained the market's ultimate wildcard. Renewed airstrikes in Yemen and heightened rhetoric between the United States and Iran kept a $2 to $4 risk premium embedded in every barrel. The conflict in Eastern Europe saw a surge in tit-for-tat strikes on energy infrastructure, including refineries and pipelines.

Yet these disruptions failed to offset the structural oversupply. Traders learned in 2025 that even significant geopolitical turmoil cannot sustainably lift prices when physical inventories are abundant.

Winners in a Down Market

Not all energy players suffered equally. ExxonMobil emerged as the year's dominant performer among integrated majors. Following its successful integration of Pioneer Natural Resources, the Texas giant reached a massive production capacity of 900,000 barrels per day in Guyana alone.

"By lowering our breakeven costs to approximately $35 per barrel, we remained highly profitable despite the price slump."

— Darren Woods, ExxonMobil CEO, Q3 2025 Earnings Call

Chevron also secured a major victory with the July closing of its $55 billion acquisition of Hess Corporation, bolstering its position in the same Guyana basin that has transformed global energy dynamics.

What 2026 Holds

Analysts are preparing investors for continued pressure in the year ahead. BNP Paribas anticipates Brent will dip to $55 per barrel in the first quarter before recovering to around $60 for the remainder of 2026 as supply growth normalizes and demand stays flat.

The global oil market is entering what analysts describe as a "supply race." Following autumn meetings, OPEC+ agreed to refrain from increasing production at the beginning of 2026, but total supplies remain elevated, and the cartel's discipline will be tested as prices languish.

Key Factors to Watch in 2026

  • Chinese demand recovery: Will the world's largest oil importer ramp up purchases?
  • OPEC+ discipline: Can member nations resist the urge to pump more?
  • U.S. shale response: Will lower prices finally slow American production growth?
  • Geopolitical developments: Any escalation in the Middle East could rapidly shift sentiment

The Investor Takeaway

For investors, 2025's oil crash offers both cautionary lessons and potential opportunities. Energy stocks broadly underperformed the S&P 500, but low-cost producers with strong balance sheets—like ExxonMobil and Chevron—demonstrated that operational excellence matters more than commodity prices in a challenging environment.

As oil enters 2026 near multi-year lows, contrarian investors may find value in a sector that Wall Street has largely abandoned. But the path forward requires patience: the supply glut that defined 2025 shows no signs of resolving quickly, and the era of $100 oil appears firmly in the rearview mirror for now.