Oil Prices Slide Amid Supply Surplus Forecast
LONDON: In a turbulent market, oil prices took a hit on Friday as analysts painted a grim picture of a looming supply surplus in 2025. This comes despite the OPEC+ alliance’s decision to delay planned supply increases and prolong deep output cuts until the end of 2026, as reported by Reuters.
Brent crude futures saw a 0.9 percent drop of 66 cents, landing at $71.43 per barrel by 2:28 p.m. Saudi time. Meanwhile, US West Texas Intermediate crude futures dipped by 1 percent, or 65 cents, to $67.65 per barrel.
For the week, Brent was set to experience a 2 percent decline, with WTI following suit with a 0.5 percent drop.
OPEC+ Extends Cuts Amid Uncertain Market
Following a meeting on Thursday, the Organization of the Petroleum Exporting Countries and its allies decided to postpone oil output increases by three months until April. Additionally, they extended the timeline for reversing cuts by a year, now slated for the end of 2026.
Originally planning to scale back cuts starting in October 2024, OPEC+ faced setbacks due to sluggish global demand, particularly in China, and increased production elsewhere, leading to multiple postponements.
Analysts Weigh In on Market Outlook
UBS analyst Giovanni Staunovo expressed surprise at the outcome of the latest OPEC+ meeting, noting the group’s unity in maintaining production cuts to stabilize the oil market.
Despite the decision, analysts remained bearish on oil prices, with expectations of a supply surplus in the coming year. Bank of America forecasted rising surpluses pushing Brent to average $65 a barrel in 2025, anticipating a rebound in oil demand growth to 1 million barrels per day.
In contrast, HSBC revised its surplus projection to 0.2 million barrels per day, down from 0.5 million barrels per day. The oil market remained stagnant, with Brent hovering between $70-75 per barrel over the past month as concerns over weak demand in China and geopolitical tensions in the Middle East lingered.
PVM analyst Tamas Varga summed up the market sentiment, stating that while short-term fluctuations may occur, the long-term outlook remains bleak.