Here’s Why Oil Prices Could Go Higher in the Short Term

Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.

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By Julianne Geiger – Feb 04, 2025, 5:00 PM CST

According to a Wall Street Journal survey—which includes projections from Goldman Sachs, JPMorgan, and Morgan Stanley—Brent is now expected to average $73.01 per barrel in 2025.
Trump’s “Maximum Pressure” on Iran strategy could lift oil prices this year.
If the U.S. enforces strict sanctions on Iran and Russia, and tariffs disrupt North American supply chains, oil prices could easily breach the $80 mark again.

Oil markets are bracing for impact as President Trump’s aggressive trade and energy policies create fresh uncertainty. Prices have been on a rollercoaster ride in recent weeks, with Brent crude trading a month ago at $76.30, shooting up to $82, then falling back down on Tuesday to $75.95 per barrel (+0.07%). But the real storm may still be ahead, as the White House aims to squeeze Iranian oil exports to zero and slap a 25% tariff on imports from Canada and Mexico.

Wall Street Banks Adjust Their Oil Forecasts

Major Wall Street banks are adjusting their expectations accordingly—but that was before Tuesday’s crackdown on Iran.

According to a Wall Street Journal survey—which includes projections from Goldman Sachs, JPMorgan, and Morgan Stanley—Brent is now expected to average $73.01 per barrel in 2025, while WTI is forecast at $68.96. This is an increase from the previous estimates, but the expectations are still below $80.

Goldman Sachs notes that while Trump’s policies may initially tighten the oil market, his broader push for energy independence could keep a lid on long-term prices. “U.S. policy risks reinforce our view that the risks to our $70-$85 Brent range forecast are skewed to the upside in the short term, but to the downside in the medium-term because of high spare capacity and because broad tariffs could hurt demand,” Goldman analysts said.

The Iran Factor: Maximum Pressure Returns

Trump’s latest move against Iran could be a game-changer. His administration is reviving the “maximum pressure” campaign, aiming to cut off Tehran’s crude sales entirely. If successful, this could eliminate up to 1.3 million barrels per day (bpd) from the global market, primarily exports to China.

This is not the first time Trump has taken such an approach. When his administration ramped up sanctions on Iran in 2018, oil prices surged beyond $80 per barrel. The market remembers, and traders are once again watching closely to see if Washington follows through with secondary sanctions—restrictions that would punish countries and companies that continue to buy Iranian crude.

Of course, oil traders are not new to this game. Iran has been adept at skirting sanctions through ship-to-ship transfers and sales to intermediaries in China. But a serious U.S. crackdown could change the equation, especially if Washington actually gets aggressive with enforcement.

Tariff Turmoil: Will Canadian and Mexican Oil Be Targeted?

At the same time, Trump’s tariff war is making investors nervous. His tariff on Canadian and Mexican imports, which was supposed to take effect last weekend, was expected to havoc on North American energy flows, sending oil prices higher. Canada supplies nearly 4 million bpd to U.S. refiners, making it America’s top crude supplier. Mexico contributes another 500,000 bpd. The tariffs, however, were paused after concessions given by the two countries—although the pause is for now only for a month.

Leading up to the tariffs, the question was, would oil be included in the tariff list? If so, it would significantly disrupt refining margins, particularly in the Midwest, which is heavily dependent on Canadian heavy crude. Canadian Foreign Minister Mélanie Joly has already warned that U.S. refiners might have to pivot to Venezuelan crude—an ironic twist given Trump’s efforts to isolate Venezuela. Ultimately, the tariff on Canadian oil was only 10% instead of the feared 25%.

Goldman Sachs believes policymakers will do what they must to avoid Brent prices soaring above $85 per barrel, as this would push U.S. gasoline prices past the politically sensitive $3.50 per gallon mark. However, if Canadian and Mexican crude become costlier due to tariffs, refiners will be forced to look elsewhere, potentially tightening the market and driving up fuel costs.

More Uncertainty Ahead

Here’s another wrinkle: Trump has hinted at tougher sanctions on Russia, too, potentially targeting its oil exports. Russia is still a major crude supplier to global markets.

Meanwhile, the Trump administration had previously signaled openness to allowing Chevron to continue limited operations in Venezuela, but a policy reversal could once again restrict Venezuelan oil from reaching the U.S. This would further tighten the supply picture, particularly for Gulf Coast refiners that rely on heavier crude grades.

The Fed, The Dollar, and Demand Concerns

Beyond the world of geopolitics, the U.S. Federal Reserve’s interest rate stance also has a role to play in the oil market, making it even more difficult for the prognosticators to pinpoint just where oil is headed.

Hopes of an imminent cut were dashed when the Fed recently decided to keep rates steady. Higher rates generally strengthen the U.S. dollar—making oil more expensive for foreign buyers. If rates remain high, demand could take a hit.

There are also lingering concerns about China’s economy, which has shown signs of slowing. As the world’s largest oil importer, any sustained weakness in Chinese demand could cap price gains. Goldman Sachs has noted that while U.S. sanctions and tariffs may push prices higher in the short term, demand-side risks could limit long-term upside.

Where Do Oil Prices Go From Here?

Right now, oil markets are caught between conflicting forces. Trump’s energy and trade policies are creating bullish supply risks, while demand uncertainties, OPEC+ decisions, and a strong dollar are acting as counterweights.

If the U.S. enforces strict sanctions on Iran and Russia, and tariffs disrupt North American supply chains, oil prices could easily breach the $80 mark again. But if OPEC+ increases production or economic concerns weigh on demand, prices may remain range-bound in the $70-$85 per barrel corridor that many analysts expect.

According to the WSJ survey, Brent was forecast at $75.33 in the first quarter, with estimates for $71.22 per barrel for WTI. The second quarter will see a drop to $74.02 and $70, respectively, and to $73.10 and $68.91 in the third, the survey showed.

By Julianne Geiger for Oilprice.com

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