Fitch Ratings has changed its 2025 outlook for the global oil and gas sector to deteriorating from neutral due to reduced global oil demand growth on weaker economic prospects following US tariff announcements, quicker-than-expected unwinding of OPEC+ voluntary production cuts, and increasing non-OPEC+ output.
Fitch lowered its oil price assumption for 2025 to USD65 per barrel from USD70 per barrel in April, while maintaining medium-term and mid-cycle price assumptions. Implications for individual issuers' ratings are likely to be limited despite this sector outlook revision, unless we significantly reduce our medium-term and mid-cycle oil price assumptions compared with those in our existing set. Fitch-rated issuers have entered this period of market volatility with strong balance sheets, following a period of high oil prices and strong capital discipline.
Fitch reduced global growth forecasts for 2025 by 0.4pp in April's special update to the quarterly Global Economic Outlook (GEO) and reduced growth for China and the US by 0.5pp against the March GEO projections. There has been some tariff de-escalation; however, uncertainty over where tariff rates will settle and the impact of those tariffs already implemented will remain key factors in our macroeconomic forecasts, leading to lower-than-previously expected oil consumption increases.
We now assume global oil demand will grow by about 800,000 barrels per day (bpd) this year, compared with our previous expectations of slightly over 1 million bpd. The market will remain oversupplied in 2025 due to faster supply growth.
OPEC+ has announced an oil output increase of 411,000 bpd for July for the third consecutive month. This policy shift is exerting pressure on oil prices as OPEC+ continues to diverge from its previous strategy of price support. The rationale behind OPEC+’s decision includes penalising non-compliant members, but it may also indicate a growing willingness to defend market share, which could further affect oil prices. OPEC+ spare production capacity was high at 5.7 million bpd in May.
The US, Brazil, Canada, Guyana and Argentina will collectively contribute just under 1 million bpd to additional production in 2025, as forecast by the International Energy Agency. Large US production companies need market prices of USD61 per barrel on average to drill new shale oil wells profitably, according to the Dallas Fed Energy Survey published in March 2025. This means that drilling may slow down. A further drop in oil prices in 2025 could lead to a slowdown in non-OPEC+ production growth, but we believe growth will remain significant given largely committed investments.
Geopolitical factors continue to play a pivotal role in oil price dynamics. Additional sanctions on Russia, Iran or Venezuela could increase oil prices. Similarly, any escalation in the conflict between Israel and Iran might result in higher crude prices.
We expect natural gas prices to support producers' cash flows, partially offsetting the impact of declining oil prices. Gas prices remain robust in Europe despite seasonal declines and temporary tariff-related market imbalances that have reduced Chinese imports and redirected cargoes to Europe. Meanwhile, US oil producers are announcing cuts in capital spending and production. These cuts in oil-related investments may favour natural gas-focused upstream issuers, as decreased oil production results in lower associated gas output, likely supporting natural gas prices.
Source: Fitch Ratings