Analysts at JP Morgan predict that crude oil prices could drop to the low $60s by the end of 2025. This follows a projected increase to $80 a barrel in the last quarter of 2024, which represents nearly a 10% rise from current levels.
The report highlights that key players in West Asia, such as Saudi Arabia and the United Arab Emirates, have strong reasons to keep the ongoing conflicts in the region under control. This is essential as the Gulf countries undergo significant economic transformations. Natasha Kaneva, head of Global Commodities Strategy at JP Morgan, noted that the current low oil inventory levels may sustain a geopolitical premium on crude prices until the conflict is resolved.
Brent crude oil prices have seen a steady increase over the past month, climbing from approximately $71 a barrel in late September to nearly $81 in early October due to rising geopolitical tensions in West Asia. However, prices have since decreased, currently trading around $73 a barrel, amid concerns about demand and optimism regarding the containment of geopolitical issues in the region.
Analysts are particularly worried about a weak demand outlook due to potential economic slowdowns in both China and the United States. Estimates from Rabobank International indicate that the oil market could be oversupplied by around 700,000 barrels per day in 2025, prompting a significant revision of their forecasts. Joe DeLaura, a Global Energy Strategist at Rabobank, stated they expect Brent prices to average $71 in the last quarter of 2024, with projections of $70 for 2025, $72 for 2026, and around $75 for 2027. He cited poor demand data from China and the U.S., along with a looming supply glut and demographic shifts, as reasons for the adjustment.
The U.S. Energy Information Administration (EIA) has also lowered its global oil demand growth forecast for 2025 by 300,000 barrels per day, now predicting an increase of 1.2 million barrels per day to reach 104.3 million barrels per day. U.S. demand is expected to hit 20.5 million barrels per day, a reduction from previous estimates. Similarly, OPEC has cut its forecasts for 2024 and 2025, expecting demand growth of 1.93 million barrels per day in 2024 and 1.64 million barrels per day in 2025 due to reduced consumption.
JP Morgan reports that global crude inventories currently stand at 4.4 billion barrels, the lowest level recorded since January 2017 and significantly lower than last year when Brent was trading at $92 per barrel. Both OECD crude and liquid inventories are below their five-year averages, and stocks at Cushing are at their lowest in 15 years.
The recent trend in oil prices has been volatile. Brent crude closed at $78.80 on the last trading day of August but fell to $68.68 by September 10. Although prices have rebounded to around $74 a barrel, analysts warn that a new yearly low could signal further declines. Rabobank’s note indicated that crude oil may test a Fibonacci extension point at $66.10 later this year.
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