Bank of America analysts predict that due to an oversupply of crude oil and a slowdown in demand as countries shift to clean energy and transportation, oil prices will fall to an average of $65 per barrel in 2025.
Francisco Blanch, Head of Global Commodities and Derivatives Research at Bank of America, said at an energy outlook roundtable on Tuesday: "Oil will not be in short supply, so we maintain a more bearish stance on oil prices for 2025."
Blanch pointed out that global market supply is ample, which could prevent price shocks at historical highs like those seen during the Russia-Ukraine conflict in 2022. Since then, domestic production in the US has surged to record levels, with the US currently supplying about 20% of the world's oil. Increased production from Venezuela and Iran has also added to supply.
Despite OPEC+ implementing production cuts to maintain price floors, the alliance has made it clear that it wants to restore supply, a move that has been delayed twice. Blanch said, "They do not want to continue losing market share, and the group is clearly interested in recovering market share and filling this gap. I think this sets a natural ceiling for oil prices."
Looking to 2025, Blanch expects oil production to significantly increase in a range of countries including Brazil, Guyana, Canada, and Argentina.
Blanch said: "Putting all these factors together, there is a considerable amount of oil supply entering the market from the Western Hemisphere. Against this backdrop, demand for oil is starting to soften."
Bank of America's outlook points out that demand growth is slowing, particularly from Asia. Blanch said, "For various reasons, demand growth in Asia has been slowing. We cannot expect 50% of future demand growth to come from Asia."
Other Wall Street analysts also believe that the oil market will be weak next year and beyond. JPMorgan analysts wrote in their (2025 Global Commodity Outlook) report on Tuesday, "Our view on oil has shifted from neutral to outright bearish."
The company expects global oil demand growth to decline from 1.3 million barrels per day this year to 1.1 million barrels per day next year, "as the last phase of the energy price rebound after the pandemic is fading, especially accompanied by improvements in energy efficiency and stronger momentum for low-carbon vehicles."
JPMorgan predicts that Brent crude oil prices will drop from an average of $80 per barrel this year to $73 per barrel in 2025, and fall to $61 per barrel in 2026.
Due to the complex geopolitical situation in the Middle East and market participants considering the possibility of OPEC+ extending production cuts, on Wednesday, the international benchmark Brent crude oil traded slightly above $73 per barrel, while WTI futures hovered around $70 per barrel.
Israel stated on Tuesday that if the ceasefire agreement between the two sides breaks down, it will re-engage in conflict with Hezbollah, in which case Israeli attacks will delve deep into Lebanon and target the country itself.
In neighboring Syria, opposition forces unexpectedly seized Aleppo last week, and the opposition and a war observer reported that on Tuesday, the opposition forces approached the major city of Hama.
Article reposted from: Jinshi Data