KUALA LUMPUR: BMI, a unit of Fitch Solutions, revised downward its annual average of US$76 per barrel for Brent crude in 2025, down from US$78 per barrel previously.

In a research note today, BMI said oil prices are expected to start 2025 at a slightly lower level than anticipated in August.

"Moreover, we had been working under the assumption of a Kamala Harris presidency in the US, and while a second Donald Trump term holds mixed meanings for oil prices, the impact is likely to be net-bearish versus Harris, at least over a six to 12-month horizon," it added.

BMI said Brent prices remained relatively range-bound over November and into December, closing between US$71.80 per barrel and US$75.5 per barrel after posting large swings earlier this year.

It added that the market seems to have entered somewhat of a holding pattern ahead of the key OPEC+ meeting on Dec 5 and Turmp's inauguration on Jan 20.

At the meeting, OPEC+ decided to extend the current cuts to March 2025 from December 2024 and also slow the pace at which cut barrels would be returned to the market.

"We had anticipated the extension and this was already factored into our forecasts, but the new, slower schedule translates into a further 263,000 barrel per day reduction in supply growth on an annual average basis next year.

"While this will narrow the expected glut, production growth will nevertheless exceed the expected growth in consumption by at least 450,000 barrels per day," BMI said.

BMI is currently forecasting oil demand to remain relatively well-supported, with 2025 growth staying broadly on par with 2024 levels.

However, it added that there were notable risks to the downside, including how Trump would approach tariffs once in office and the impact this has on economic activity, trade, inflation and the US dollar.

"We believe actual tariff measures will be more limited than his bellicose statements suggest, given that these likely represent a starting position for negotiations.

"Moreover, their implementation will likely be gradual to help manage the macroeconomic fallout and temper market volatility," it added.

Nevertheless, BMI said these tariff measures could impact oil prices via both weaker fundamentals and sentiment channels.

It said China, which is subject to a growing number of trade barriers globally, would be a primary target, and the US and China alone account for around 37 per cent of global oil consumption.

"Several other markets may also come into the firing line, including Mexico, Canada, Vietnam, Germany, Japan, South Korea, Taiwan, China and Italy and these account for a further 15 per cent.

"Any adverse impact on economic activity and trade flows would erode demand to at least some degree and, even if consumption is unaffected, tariff announcements could dent investor confidence in oil," it said.

BMI added that higher tariffs in the US could, when coupled with a rise in deportations and domestic tax cuts, lead to a re-emergence of inflationary pressures.

"While higher inflation may incentivise investment in Brent as an inflation hedge, to the extent that it pressures corporate profit margins and household budgets, it could also undercut physical oil demand at the margins," it said.