The OPEC+ group, led by Saudi Arabia and Russia, has decided to delay the unwinding of its production cuts until 2025 due to bearish forecasts indicating prices may fall between $60 and $70 per barrel. The first addition to oil supply, amounting to 180,000 barrels per day, is expected in December instead of October as initially planned. Members of OPEC+ agreed to extend the current cuts until the end of November, gradually phasing them out on a monthly basis starting December 1st, 2024.
Market analysts have expressed concerns about weakening oil demand, particularly in China, and the potential oversupply in the global oil market. Morgan Stanley has revised its Q4 oil price forecast, lowering its Brent oil price estimate to $75 per barrel from $80 per barrel for the fourth quarter of the year. This adjustment reflects worries about the recent downward trajectory of oil prices, largely driven by weaker-than-expected Chinese demand and concerns about demand in the US and Europe.
Adding to the bearish sentiment are fears of slowing economies in the US and Europe, as well as expectations of a potential restart of Libya’s oil production that could further contribute to oversupply. Analysts at Goldman Sachs have reduced their range for Brent oil prices to $70-$85 per barrel, citing weak Chinese oil demand, high inventories, and increasing US shale production. Additionally, Citi sees oil prices dropping to $60 per barrel next year if OPEC+ fails to implement further production cuts.
Commodity traders Gunvor and Trafigura anticipate that oil prices could range between $60 and $70 per barrel due to sluggish demand from China and the lingering oversupply in the market. Gunvor’s co-founder and chairman, Torbjorn Tornqvist, believes that the global oil balance favors oversupply, with oil’s fair value estimated at $70 per barrel. He acknowledges OPEC’s efforts in managing production but points out that the issue lies in non-OPEC growth.
Despite concerns over weak demand, oil remains vulnerable to price spikes from geopolitical events or supply disruptions. According to experts, the record number of short positions in the market could lead to unexpected changes in oil prices. As uncertainties persist in the market, oil producers and traders continue to monitor global demand and supply dynamics to navigate potential price fluctuations.
