Oil prices remained largely unchanged during Thursday’s intraday trading, following a significant drop of over 4% on Tuesday, which brought them to their lowest level in nearly two weeks. The price dip came as fears of a supply disruption from Iran eased. By 12:50 p.m. ET, Brent crude for December delivery was down 0.3%, trading at $74.12 per barrel, while West Texas Intermediate (WTI) crude for November delivery held steady at $70.36 per barrel.
According to analysts at Standard Chartered, market sentiment remains predominantly negative, particularly among speculative traders. They compared the current mood to the bearish tone seen during the onset of the Global Financial Crisis in late 2008.
The ongoing concerns over oversupply and weak demand have contributed to the negative sentiment, with major energy agencies presenting conflicting forecasts for the oil market. The International Energy Agency (IEA) predicts OPEC crude oil output will be 700,000 barrels per day higher by 2025. OPEC+ output, including all Declaration of Cooperation (DoC) members, is expected to rise by 967,000 barrels per day, with total DoC liquids output projected to increase by 1.323 million barrels per day. In contrast, the OPEC Secretariat’s figures, which average seven secondary sources, align more closely with estimates from the U.S. Energy Information Administration (EIA) rather than the IEA.
Adding to the bearish outlook, the IEA has recently forecasted that global demand for fossil fuels, including oil and natural gas, will stop growing by the end of this decade. This prediction comes even as oil and liquefied natural gas (LNG) supplies are expected to continue expanding, which is likely to put further downward pressure on prices.
Despite the negative implications for oil and gas markets, the IEA sees a silver lining for consumers. As renewable energy sources become more dominant in the energy mix, electricity prices are expected to decrease. IEA Executive Director Fatih Birol noted in an interview that the global energy market is set to shift in the latter half of the decade, with reduced demand and increased supply leading to lower prices—barring any major geopolitical conflicts. “We will be entering a period where prices will see significant downward pressures,” Birol said.
The IEA also projects a rapid rise in electricity use over the next decade, growing six times faster than total energy demand. Electric vehicles are expected to make up 50% of new car sales worldwide by 2030, a significant increase from the current 20%. The agency further predicts that by 2030, the levelized cost of electricity (LCOE) from solar photovoltaic (PV) systems with storage in the U.S. will drop to $45 per megawatt-hour (MWh), significantly lower than the $70/MWh cost from natural gas.
“In energy history, we’ve seen the Age of Coal and the Age of Oil – now we’re moving rapidly into the Age of Electricity,” said Birol.
Other experts echo the IEA’s views on the rise of renewable energy. The International Renewable Energy Agency (IRENA) emphasizes that renewables not only reduce dependence on volatile fossil-fuel imports but also lower average electricity costs and shield consumers and industries from the impacts of high energy prices. Like the IEA, IRENA predicts that by 2030, solar PV, concentrated solar power (CSP), and both onshore and offshore wind will generate electricity at costs far below those of fossil fuels.
You Might Be Interested In