WPB foresees crude oil markets falling, with the prices going below $60 per barrel by the end of the year as OPEC+ gradually unwinds its earlier output restrictions. According to the analysts, the incremental unwinding of supply restrictions by the alliance may portend oversupply levels.
Eight of the OPEC+ members, including Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman, already have begun reversing some of the 1.65 million barrels per day (bpd) reductions that took effect in April 2023. A reversal of 137,000 bpd to global supply has been begun, with the group justifying the move on strong global economic fundamentals and firm market fundamentals in the form of historically low inventories.
Although growth is proportionally modest, market analysts warn that a surplus will ultimately materialize later in the year and carry over into the beginning of next year, exerting downward pressure on prices. Some estimates have crude dipping into the mid-$50s, thus putting significant emphasis on U.S. shale production. It is also said that the full effect of the phasing policy shift by OPEC+ remains to be seen.
Forecasts also indicate that the lower prices can slow the growth in production in the short term. Yet, the decline can set the stage for a return to the rise in prices around 2026.
In the early Asian trade, oil prices registered a 1.6% gain, since the market had been expecting a bigger supply surge from OPEC+. If prices avoid a sharp fall, then OPEC+ would be encouraged to drive the pace of unwinding sooner, as in earlier decisions that dealt with larger-sized changes.
Analysts point out that the real effect on market forces will only become apparent when inventories begin to accumulate. Even prior to the latest OPEC+ action, however, financial markets were already predicting a drop below $60 per barrel by year's end. The conventional wisdom is that peak seasonal demand has now passed, and as consumption is reduced in the fourth quarter, increasing supply will dominate demand and continue to pressure prices lower.
By WPB
Oil, Crude, Bitumen
If the Canadian federal government enforces stringent regulations on emissions starting in 2030, the Canadian petroleum and gas industry could lose $ ...
Following the expiration of the general U.S. license for operations in Venezuela's petroleum industry, up to 50 license applications have been submit ...
Saudi Arabia is planning a multi-billion dollar sale of shares in the state-owned giant Aramco.
