Crude oil prices opened this week with a drop as traders took profits and braced for the U.S. Federal Reserve’s rate decision later this week. Markets are expecting another rate cut, which could potentially boost oil prices.
At the time of writing, Brent crude was trading at $74.20 per barrel, while West Texas Intermediate (WTI) was at $70.91 per barrel, both lower than the opening prices. However, these losses could be reversed later in the day due to a temporary force majeure on Libyan oil. Armed clashes near the Zawiya refinery and export terminal led to fires at oil storage tanks, disrupting operations.
“After last week’s +6% rally, and with crude oil trading near the top of recent range highs, we’re likely seeing some light profit-taking,” said Tony Sycamore, an analyst at IG, in an interview with Reuters. He also noted that many traders closed their positions at the end of last week and have reduced their market activity ahead of the holiday season.
Geopolitical risks and supply concerns remain key factors that could drive oil prices higher. However, Vivek Dhar from the Commonwealth Bank of Australia (CBA) told Bloomberg that the overall outlook for oil prices is still cautious. CBA analysts predict that Brent crude could drop to $70 per barrel next year due to oversupply, with non-OPEC+ production growth outpacing global demand for oil.
In a 2025 outlook, ING commodity strategists warned that oil market growth would remain modest in the coming years. “The market will see fairly modest demand growth in 2025, driven by both cyclical and structural factors,” said Warren Patterson and Ewa Manthey. They added that non-OPEC supply is expected to remain strong, while OPEC still has significant spare production capacity, which should offer some market stability.
While lower U.S. interest rates could support higher oil prices, non-OPEC supply growth and demand outlooks remain uncertain, meaning oil prices could move in any direction next year. One thing that seems clear is that China is unlikely to return to the post-pandemic surge in oil demand, as the economy continues to normalize after the lockdowns.
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