JPMorgan said in a report on Thursday that it expects OPEC+ to maintain current production levels for at least another year, keeping Brent crude prices at an average of $75 in 2025.
OPEC+ agreed on Thursday to postpone planned oil production increases in October and November and to suspend or reverse further production increases if necessary.
JPMorgan said the window for phasing out production cuts was now closed, and it expected Brent crude prices to fall to a low of $60 a barrel by the end of 2025.
“Oil prices of $60 a barrel are not a good price for producers and consumers alike, and if OPEC+ insists on market management, the alliance will need to cut production by a further 1 million barrels per day,” the bank said.
With demand expected to weaken significantly by 2025, the market is now looking for a price point that would stop OPEC+ from bringing in unnecessary supply, JPMorgan said.
To reflect the recent decline in oil prices, the bank cut its forecast for the average price of Brent crude in the fourth quarter of 2024 to $80 a barrel from $85.
The move comes as oil prices slumped to a 14-month low as concerns about demand in the world's largest oil consumer and a possible increase in Libyan supply offset a sharp drop in U.S. inventories and a delay in OPEC+ production increases.
Analysts at U.S. investment banking firm Jefferies said the OPEC+ decision would reduce oil supply tightening in the fourth quarter by about 100,000-200,000 bpd, which should be enough to prevent inventory buildup even if demand does not improve.
However, Bob Yawger, director of energy futures at Mizuho, said the market was not happy with the OPEC+ news.
“Even without the chaos created by OPEC+, the gasoline market is capable of crashing crude oil. If you don’t need gasoline, you don’t need crude oil to make gasoline,” said Yoger.
U.S. gasoline futures fell to their lowest closing level since March 2021 after energy companies unexpectedly added 800,000 barrels of gasoline inventories last week.
“There are a number of factors that are really working against OPEC+ over the next few months,” Andy Lipow, president of Lipow Oil Associates, told CNBC on Thursday. “They want to see Brent between $85 and $90 a barrel to balance their budgets.”
He further explained: “We are heading into a period of lower demand on the consumer side and on top of that we are heading into a seasonal refining maintenance period in the U.S. and Europe which will reduce crude oil demand. In the U.S. the gasoline driving season is now over.”
Article forwarded from: Jinshi Data
