Analysts at Wells Fargo predict that oil prices will stay low through 2025 due to the risk of a global oversupply. They attribute this forecast to ongoing growth in U.S. shale production and slowing demand from major economies, particularly China. The bank also notes that expected reductions in OPEC+ production cuts by the end of 2024 could contribute to a supply surplus in 2025, despite the current tight market.
Wells Fargo estimates that global oil supply will increase from 102.8 million barrels per day (bpd) in 2024 to 104.8 million bpd in 2025. This rise will come from non-OPEC producers like the U.S. and Brazil, along with planned increases from OPEC. The analysts compare the current market conditions to 1998, when oil prices collapsed due to a global economic slowdown and an influx of new supply. While they do not predict a repeat of that situation in 2025, they acknowledge investor concerns about economic uncertainties in China and OPEC+’s intent to scale back production cuts.
The growth of U.S. shale supply is not expected to significantly impact global oversupply as it has in the past. U.S. oil output increased by only 0.1 million bpd through the third quarter, a stark contrast to the average growth of 0.6 million bpd seen in previous years.
Wells Fargo has revised its oil price forecasts downward, expecting Brent crude to average $70 per barrel in 2025, and West Texas Intermediate (WTI) crude to average $65 per barrel. However, the bank acknowledges that various factors could change the oil price outlook, including a quicker recovery in global demand, especially from China and OECD countries.
You Might Be Interested In
- How to Buy Crude Oil on TD Ameritrade?
- How to Trade Oil CFDs?
- How to Trade Crude Oil in Angel Broking?