Tom Kloza, head of global energy analysis at Oil Price Information Service, said the oil market is heading into a turbulent year in 2025, with crude prices likely to fall "very, very" low.
The oil analyst said crude prices will face greater downward pressure in 2025 despite concerns that conflict in the Middle East could escalate and push up oil prices.
He told CNBC in an interview on Wednesday that traders should not bet on supply disruptions in the Middle East and that global oil supplies are already so glutted that prices are bound to fall.
Data from the U.S. Energy Information Administration show that in 2023, the United States will produce more oil than any other country in history. Goldman Sachs previously estimated that the production boom may continue until at least 2026 due to factors such as improved drilling efficiency.
The Organization of the Petroleum Exporting Countries (OPEC+), led by Saudi Arabia, is also expected to add more crude output by the end of the year, Kloza said, citing a recent ministerial meeting that reviewed the state of the oil market.
“Oil prices are going to go lower because you have to factor in that as temperatures ease in Saudi Arabia and Iraq, there’s probably going to be about 600,000 or 700,000 barrels of additional crude being exported,” Kloza said. “You’re looking at a downward market.”
"The future direction of oil prices will depend on Israel's response," ING analyst Warren Patterson said in a recent note to clients. "A similar response to Iran's April attack could cause the risk premium to eventually begin to fade, with fundamentals once again taking precedence."
Patterson said if Israel attacks Iran’s midstream and upstream oil assets, it would hit Iran’s oil export capacity and have a major impact on global markets, potentially pushing oil prices to $90 a barrel by 2025. ING currently expects Brent crude to average $72 a barrel next year.
However, Kloza dismissed concerns that conflict in the Middle East could lead to supply disruptions.
"While it is theoretically possible, the probability of it actually happening is so low that it's not worth the gamble," he said.
Kloza said large investors are also no longer trying to "chase" oil, which he believes could limit the upside for crude prices.
He pointed to the views of other energy forecasters who predict that oil prices could fall as low as $50 a barrel, a drop of about 37% from where Brent crude was trading on Thursday.
“I think oil prices are destined to be much lower and whoever wins the presidential election next month is probably going to have a little bit of an oil price tightening problem,” he said. “If OPEC+ puts some of the production that it previously cut back into the market, I think that’s going to be a real problem in 2025.”
Article forwarded from: Jinshi Data