The U.S. Energy Information Administration (EIA) projects that crude oil prices will remain stable for the third quarter of 2025, primarily due to yet another year of record-high U.S. oil production.
The EIA has revised its 2025 production forecast upward, from 13.44 million barrels per day (bpd) to 13.53 million bpd. This is a significant increase from the 13.23 million bpd recorded last year, cementing the United States’ position as the world's largest crude oil producer. However, the U.S. is also the world's top consumer of crude oil, meaning the bulk of its output is used domestically, allowing Saudi Arabia to retain its title as the world's largest oil exporter.
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| Image: credit - EIA |
While the resulting rise in global oil inventories is good news for consumers, the EIA notes an associated risk: the increased production could lead to a supply glut. This oversupply, in turn, could put financial pressure on U.S. shale producers, forcing them to contend with falling profits due to lower oil prices.
The EIA's concern over a potential supply glut directly affects U.S. shale oil companies. These producers, particularly those operating in basins like the Permian, rely on higher per-barrel prices to maintain the substantial capital expenditures required for fracking and horizontal drilling. A market saturated with cheap oil erodes their profit margins, potentially stalling investment in new drilling projects and challenging the viability of smaller, debt-leveraged operators. This is the core risk the EIA identifies: while consumers benefit, the engine of current U.S. production—the shale sector—faces a significant economic squeeze.
Despite the optimism surrounding stable, low oil prices, geopolitical risks still threaten the market: the stability of the oil market is undermined by several major international flashpoints:
The Trump administration is determined to prevent Russia from selling its oil to key buyers, including India, China, and some European nations. This strategy involves the threat of secondary sanctions on entities—banks, shippers, and insurers—that facilitate Russian oil trade above certain price caps. This creates anxiety among global commodity traders by introducing regulatory uncertainty and the risk of sudden, politically motivated supply disruptions.
The snapback of U.S. sanctions on Iran is making it difficult for the country to legitimately get its oil to market, forcing it to resort to illicit export methods. This is compounded by rising tensions in the Persian Gulf, the world's most critical oil transit chokepoint. The Iranian navy has issued explicit threats to use force against any foreign entity that attempts to raid or interfere with its commercial ships. Any actual confrontation in the Strait of Hormuz could instantaneously block or severely restrict the flow of approximately one-fifth of the world’s daily petroleum consumption, leading to a sudden and massive price spike.
All in all, the price of oil is expected to remain stable for the rest of the year, despite the potential for an unexpected military escalation in geopolitical flashpoints.
