 "Crude oil can hit low $60s by 2025-end despite geopolitical conflict")
Crude oil prices could dip to the low $60s by the end of 2025 after rising to $80 a barrel in the last quarter (October–December) of 2024 — up nearly 10 per cent from current levels, suggest analysts at JP Morgan.
The main players in West Asia, including Saudi Arabia and the United Arab Emirates, have a strong incentive to keep the conflict contained, according to the JP Morgan report, given the economic transformation taking place across the Gulf region.
“The current situation suggests that, given the low level of oil inventories, there could be a sustained geopolitical premium in crude prices until the conflict is resolved in the short term,” said Natasha Kaneva, head of global commodities strategy at JP Morgan, in a recent report.
Brent crude oil prices gained steadily over the past month, rising from $71 a barrel in late September to nearly $81 a barrel in early October as geopolitical tensions in West Asia took centre stage. Since then, they have given up most of their gains and are now trading around $73 a barrel amid demand concerns and hopes that the geopolitical situation in West Asia may be contained.
A weak demand outlook, particularly due to worries about an economic slowdown in both China and the US, is weighing on prices, analysts said.
According to estimates by analysts at Rabobank International, markets are projected to be oversupplied in 2025 by about 700,000 barrels per day (bpd), reflecting a dramatic shift in their forecasts.
“We now expect Brent to average $71 in October–December 2024. Further out, we forecast 2025 prices to average $70, 2026 to rise to $72, and 2027 to trade around the $75 mark. Recent confirmation of poor demand data from China and the US, along with a looming supply glut and long-term demographic shifts, has caused us to revisit our models and forecasts,” said Joe DeLaura, global energy strategist at Rabobank International, in a note co-authored with Florence Schmit, their energy strategist.
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Demand slowdown
The Energy Information Administration, meanwhile, has revised its 2025 global oil demand growth forecast down by 300,000 bpd, now expecting a 1.2 million bpd increase to 104.3 million bpd, citing weaker economic activity in China and North America. US demand is also expected to reach 20.5 million bpd, down from earlier estimates.
The Organization of the Petroleum Exporting Countries, on the other hand, similarly cut its 2024 and 2025 forecasts, projecting demand growth of 1.93 million bpd in 2024 and 1.64 million bpd in 2025 due to weaker consumption.
Global crude inventories, according to JP Morgan, currently stand at 4.4 billion barrels — the lowest on record since January 2017 and markedly below last year’s levels when Brent was trading at $92 per barrel.
Both the Organisation for Economic Co-operation and Development crude and liquids inventories sit below their five-year range and five-year averages, JP Morgan said, and oil stocks at Cushing are severely depleted by standards of the past 15 years.
“The last three weeks have witnessed a dramatic selloff in oil prices. The final trading day of August saw Brent close at $78.8, and by September 10, Brent traded down to $68.68. Prices have bounced since then, with current prices around $74 a barrel. A new yearly low is a huge marker for more downside to come, and we foresee that crude is likely to test the Fibonacci extension point at $66.1 at some point this year,” the Rabobank note said.