The global oil market is currently facing a potential surplus in supply due to the surge in non-Opec+ oil production, according to market experts. BofA Global Research analysts have noted an increase in oil production from countries like Brazil, Guyana, Canada, and the United States, which is expected to continue growing over the next few years. This rise in production may lead to an imbalance in the market, especially as Opec+ considers reintroducing more barrels later in the year, potentially adding to the surplus.
Spencer Dale, BP chief economist, also warned that Opec+ may have limited options to boost output without putting pressure on oil prices, as countries like the US, Brazil, and Guyana are already ramping up their production. Bringing back more oil supply into the market could lead to instability if demand does not match the growth in supply. This decision will ultimately be up to Opec+ to determine the best course of action.
Recent data from the International Energy Agency indicates that global oil markets could shift from a deficit to a surplus in the next quarter if Opec+ goes ahead with their plans to increase output starting in October. Opec and its allies have been withholding supplies to support prices for the past two years, but the recent rise in production from other countries has put pressure on this strategy. The market is now divided on whether Opec+ will unwind some of their production cuts to balance the supply-demand equation.
In addition to increased production and changes in supply dynamics, other factors like tensions in the Middle East, supply disruptions, and weather conditions will also play a role in determining oil prices in the coming year. The overall outlook for oil prices remains uncertain, with various factors contributing to the market’s volatility. Despite efforts to stabilize prices, the ongoing challenges in the global economy and geopolitical landscape continue to impact the oil market.
Oil prices have seen fluctuations this year, with various factors influencing market sentiment. The latest API inventory report and hopes of a ceasefire in the Middle East have contributed to the depressed prices, along with concerns over weak Chinese demand. Despite these challenges, BofA’s projections suggest that global oil demand will continue to increase over the next few years, leading to a potential surplus of 700,000 barrels per day in 2025. This surplus could result in a buildup of commercial and strategic oil inventories, further impacting market conditions.
Looking ahead, BofA Global Research forecasts that Brent crude oil prices will average $86 per barrel in 2024 before declining to $80 per barrel in 2025, reflecting the anticipated softer market conditions. These projections highlight the challenges that the global oil market is facing, including the delicate balance between supply and demand, geopolitical tensions, and economic uncertainties. As the industry navigates through these complex dynamics, market players will need to closely monitor developments to make informed decisions and adapt to changing market conditions.
