Citi analysts on Wall Street have forecast that the oil market will experience a shortfall in Q4 2024. This is due to OPEC‘s choice to postpone reducing oil production cuts and the ongoing halt of Libyan oil exports. As a result, Brent crude oil prices are expected to be supported in the range of $70 to $75 per barrel, according to Reuters.
Despite this temporary support, Citi cautions that Brent prices may face “renewed price weakness” in 2025. They anticipate a drop to $60 per barrel due to an excess supply of one million barrels daily.
Over the past week, oil prices have seen an uptick. Brent crude oil for November delivery increased from a two-year low of $69.19 per barrel on September 10 to an intraday high of $74.50 at 10:40 am ET on September 19. Similarly, West Texas Intermediate (WTI) crude for October delivery rose from $65.75 per barrel to $71.11 during the same period.
Standard Chartered’s commodity analysts are more optimistic about oil prices. They predict that there will be no oversupply in Q4 2024 and the first half of 2025 if OPEC+ members adhere to their production commitments. StanChart noted last week that the market is underestimating the potential for further reductions in oil supply in the coming months.
In July, Russia, Iraq, and Kazakhstan submitted compensation plans to the OPEC Secretariat for overproduced crude oil volumes during the first half of 2024. OPEC has stated that these excess volumes will be compensated for over the next 15 months, ending in September 2025. Russia is set to compensate with a cumulative 480,000 barrels per day, Iraq with 1,184,000 barrels per day, and Kazakhstan with 620,000 barrels per day.
StanChart’s calculations suggest that when the compensation schedule is combined with the recently announced reduction in production targets due to the delay in tapering implementation, OPEC’s production will be 530,000 barrels per day lower in Q4 2024, 540,000 barrels per day lower in Q1 and Q2 2025, and 560,000 barrels per day lower in Q3 2025, provided all commitments are honored.