The oil market is expected to face a surplus over the next five quarters due to weaker-than-anticipated demand, according to a note released by Macquarie on Friday. The bank has revised its price forecasts for Brent and WTI crude oil, lowering expectations for the remainder of the year.
Macquarie highlighted that the current period of market tightness, driven by third-quarter demand, is fading as the industry enters the “shoulder and turnaround season.” The note stated that the oil market is poised for “heavy oversupply” over the next five quarters. As a result, the bank reduced its Brent Crude price forecast by $2 per barrel, expecting it to average $80 for the rest of 2024. Similarly, it cut the WTI Crude price forecast by $2, with an expected average of $75 per barrel for the remainder of the year.
Looking ahead to 2025, Macquarie anticipates a “heavy surplus” in the oil market. This surplus is projected to result from an increase in non-OPEC+ oil supply amid sluggish demand growth. The bank also suggested that this excess supply may delay the need for OPEC+ to reverse its ongoing production cuts.
The report comes in the same week that both OPEC and the International Energy Agency (IEA) reduced their global oil demand growth forecasts. Both organizations cited weaker-than-expected consumption from China as a significant factor in the downward revisions. However, OPEC remains more optimistic than the IEA regarding Chinese and global oil demand for the rest of the year, despite this being the second consecutive demand downgrade.
Other major financial institutions have also revised their oil price forecasts recently. Goldman Sachs lowered its expected range for Brent prices by $5, predicting a range of $70 to $85 per barrel. The bank attributed this revision to weak Chinese oil demand, high inventory levels, and rising U.S. shale production.
Similarly, Morgan Stanley reduced its Brent forecast just weeks after lowering it to $80 per barrel for the fourth quarter. The bank now expects Brent to average $75 per barrel in the final quarter of 2024. Morgan Stanley analysts cited mounting demand challenges as the primary reason for the further price cut.