In early December, a pivotal decision came from OPEC+, indicating a delay in the adjustment of oil production cutsOriginally set to begin in January 2025, the plan to ease cuts of 2.2 million barrels per day has now been postponed to April 2025. Analysts from Dutch multinational ING have suggested that oil demand growth in 2025 will be relatively modest, with an estimated increase of 1.1 million barrels per day next yearHowever, they warn that this growth will not be sufficient to absorb the anticipated increase in production from non-OPEC countries.

Experts are cautious, predicting that the combination of rising production from non-OPEC nations and only modest growth in global oil demand will lead to a saturated market next year

Even with the expected relaxation of OPEC+ production cuts in 2025, many analysts and investment banks foresee an oversupply in the oil marketThey project that oil prices may hover around the current levels, approximately $70 per barrel for Brent crude, but heightened trade tensions could inject downward risk into the forecasts.

A persistent theme amongst traders and analysts is the realization that predictions regarding oil prices invariably errDespite underlying market fundamentals and geopolitical events, sentiment regarding oil prices appears more pessimistic than optimistic among experts.

The prevailing outlook is that even with the planned production relaxation by OPEC+ set to start in April 2025, the oil market will still witness an oversupply next year.

At the beginning of December, OPEC+ conclusively decided to push the start of easing production cuts of 2.2 million barrels per day from January to April 2025. Moreover, they extended the duration of these eased cuts into the following year, lasting until September 2026.

Investment banks have indicated that although concerns over the oversupply may not be as dire as previously thought following OPEC+’s announcement, the market will still experience an oversupply

• Dual Approach to Enhance Benefits
• Dow Records Ten Consecutive Declines
• Fed Cuts Rates 100 Basis Points This Year
• Dividends or Growth? Funds Diverge in Year-End Rally
• Federal Reserve Eases Expectations on Rate Cuts

Commodity strategists Warren Patterson and Ewa Manthey from ING reiterated in a recent report that they anticipate an oversupply in the oil market next year, contingent on the production policies of OPEC+.

The strategic outlook is that oil demand growth in 2025 will remain "considerably mild" due to both cyclical and structural factorsFurthermore, they expect a robust supply growth from non-OPEC nations yet again, emphasizing the substantial idle capacity that OPEC still holds should continue to provide market comfort.

Long-standing predictions from the International Energy Agency (IEA) suggest that significant oversupply could arise in 2025. According to the IEA in its recent monthly report, if OPEC+ maintains its oil output levels throughout 2025, there will still be a surplus of 950,000 barrels per day next year

Should OPEC+ decide to lift voluntary production cuts beginning at the end of March 2025, this surplus could escalate to 1.4 million barrels per day.

The agency's data reveals that global oil demand is projected to rise by 1.1 million barrels per day next year, yet this will fall short of accommodating supply increases, which primarily stems from non-OPEC countries like the United States, Brazil, and Guyana.

OPEC's current challenge reflects a broader reality of diminishing oil demandWith Asia being a critical player in the global oil consumption narrative, disappointing consumption statistics from major Asian economies have led to this year’s oil demand not meeting initial expectationsConsequently, OPEC has made the substantial decision to downgrade its demand growth forecast for 2024 for the fifth consecutive month.

In its short-term energy outlook released in December, the US Energy Information Administration noted that if OPEC+ proceeds with the proposed cuts, global average stocks are projected to increase by approximately 100,000 barrels per day starting in the second quarter of next year.

The EIA expressed predictions that stockpile increases would likely exert downward pressure on oil prices in late 2025, projecting a decline from an average of $74 per barrel in the first quarter of 2025 to around $72 in the fourth quarter.

They forecast the annual average price of Brent crude for 2025 at $74 per barrel, a drop from approximately $80 per barrel this year.

Recent surveys among analysts have corroborated this downward trend, as experts continue to lower oil price forecasts in light of robust supply growth against a backdrop of faltering demand.

ING's strategists noted that overall, their outlook beyond 2024 is pessimistic largely due to favorable fundamentals, compounded by expectations of a stronger dollar potentially impacting commodity markets negatively.