The crude oil market is likely to be in full surplus by 2025, with Goldman Sachs and Morgan Stanley making overnight revisions to their forecasts
Goldman Sachs has lowered its Brent crude oil price forecasts for this year and next year by $2 to $3 per barrel. Morgan Stanley has cut its quarterly price forecast for this year by $5 and expects the oversupply of crude oil to worsen, with a daily oversupply of 1.1 million barrels expected in the second half of this year
OPEC+ suddenly announced a significant increase in production, leading to a sharp decline in crude oil futures prices, and major Wall Street investment banks have lowered their oil price forecasts.
Goldman Sachs has cut its Brent crude oil price expectations for this year and next by $2 to $3 per barrel. Morgan Stanley's adjustment is even larger, reducing its quarterly price expectations for this year by $5. ING Groep has also lowered its oil price outlook.
Morgan Stanley expects the oversupply of crude oil to worsen, with a daily oversupply of 1.1 million barrels expected in the second half of this year. This means that the crude oil market will face the risk of oversupply by 2025.
Concerns Over Oversupply Intensify, Market Outlook Uncertain
The Saudi Arabia-led OPEC+ alliance decided to significantly increase production on Saturday. This decision caught the market off guard, causing crude oil futures prices to drop.
On Monday, U.S. crude oil futures fell 4.27% to $56.30 per barrel. The global benchmark Brent crude dropped $2.39 to $59.09 per barrel. Oil prices have fallen more than 20% this year.
Just a month ago, OPEC+ had announced an increase in production by the same amount in May, with two consecutive months of production increases putting pressure on the market. The direct reason for the increase is the non-compliance of major member countries, particularly Iraq and Kazakhstan. Several OPEC+ representatives revealed that unless countries agree to a production cut agreement, Saudi Arabia is considering gradually canceling its previously committed voluntary production cut of 2.2 million barrels per day at a similar pace.
Analysts believe that Saudi Arabia seems to hope to win the favor of the U.S. government while challenging the rise of U.S. shale oil. Goldman Sachs analyst Daan Struyven stated in a report that high idle capacity and high recession risks indicate that there is a downside risk for oil prices. They believe that OPEC+'s move may also aim to "strategically constrain U.S. shale oil supply."
The crude oil market faces increasing uncertainty. Warren Patterson, head of commodities strategy at ING, believes that Saudi Arabia's tolerance for low oil prices is key to determining the depth of its production increase actions. Tariff risks have led to unclear demand prospects, while changes in OPEC+ policies have exacerbated supply uncertainties.
ING predicts that due to OPEC+'s more aggressive production increases, the oversupply of crude oil will be brought forward, with the market expected to be in a state of oversupply throughout 2025.
