Pumping machine on Thursday, October 3, 2024 in Midland, Texas, USA.
Anthony Prieto | Bloomberg | Getty Images
Market observers say oil prices could fall sharply if oil alliance OPEC+ lifts existing production cuts, and they predict a bearish outlook for crude prices in the year ahead.
Tom Kloza, global head of energy analysis at oil price reporting agency OPIS, said: “There are more concerns about oil prices in 2025 than at any time in years – any year in my memory since the ‘Arab This has been the case since the Spring of 2016.
“If OPEC breaks up and there is no real agreement to control production, oil prices could fall to $30 or $40 a barrel. Their market share has really been shrinking over the years,” Kloza added.
A drop to $40 a barrel would mean a drop of about 40% in current crude oil prices. Global benchmark Brent crude is currently trading at $72 a barrel, while U.S. West Texas Intermediate crude futures are around $68 a barrel.
Oil prices year to date
Considering that oil demand growth next year may not exceed 1 million barrels per day, the full lifting of OPEC+ production cuts in 2025 “will undoubtedly lead to a sharp decline in crude oil prices, possibly falling to US$40 per barrel,” Henning Eurasia Group Energy, Climate and Resources Supervisor Glostein told CNBC.
Similarly, Saul Kavonic, senior energy analyst at MST Marquee, believes that if OPEC+ eases production cuts without considering demand, it will “effectively amount to a price war for market share, which may lead to oil prices falling to levels not seen since the COVID-19 pandemic.” lowest point”.
However, analysts say the alliance is more likely to opt for a gradual dissolution early next year than a full, immediate dissolution.
If producer groups continue with their production plans, the market surplus could nearly double.
Francisco Martocia
Citi Energy Strategist
The oil cartel has been disciplined in maintaining voluntary production cuts and has even extended them.
In September, OPEC+ delayed by two months the start of a gradual reduction in voluntary production cuts of 2.2 million barrels per day in an effort to stem falling oil prices. The 2.2 million barrels per day production cut implemented in the second and third quarters was originally scheduled to expire at the end of September.
early this monthAfterwards, the oil cartel decided again to postpone the original oil production increase plan for another month to the end of December.
A slow recovery in demand from China, the world’s second-largest economy and major crude oil importer, has weighed on oil prices. in its monthly report A report released by OPEC on Tuesday lowered its global oil demand growth forecast in 2025 from 1.6 million barrels per day to 1.5 million barrels per day.
Glostein emphasized that the market is obviously oversupplied, especially major oil producers outside the OPEC alliance such as the United States, Canada, Guyana and Brazil, which also plan to increase supply, which has also intensified the pressure on prices.
Oil looks bearish in the year ahead
Citibank energy strategist Matoscia Francesco said the market consensus is that oil inventories will increase next year.
“If producer groups continue with their production plans, the market surplus could almost double… to 1.6 million barrels per day,” Francesco said.
Even if OPEC+ does not ease production cuts, the future of oil prices remains uncertain. Citi analysts expect Brent crude oil prices to average $60 a barrel next year.
Analysts who spoke to CNBC said the arrival of U.S. President-elect Trump has further exacerbated the pessimistic outlook, with some linking his return to a potential trade war.
“If we do get into a trade war — which many economists think is possible, especially with China — we could see a significant drop in prices,” OPIS’s Kloza said.
Trump also promoted the “baby diamond” policy to American manufacturers. Vows to cut energy prices in half.
For that to happen with retail gasoline prices, oil prices would need to fall “below $40” a barrel, said Matt Smith, chief oil analyst at Kpler.
Smith added that retail gasoline prices are currently at a “sweet spot” of $3 a gallon, where consumers are not feeling the pinch and input prices are still high enough for producers.
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