Oil prices declined slightly due to pessimistic demand forecasts and former President Trump’s push for increased production. North Sea Brent crude dropped to $73.41, while West Texas Intermediate fell to $70.02. The International Energy Agency predicts a supply surplus by 2025, with OPEC+ struggling to meet production targets. Geopolitical tensions, including EU sanctions on Russia and instability in the Middle East, contribute to market caution and potential upward pressure on prices.
Oil Prices Dip Amid Gloomy Market Projections
On Thursday, oil prices experienced a slight decline after an initial upswing, primarily driven by pessimistic forecasts regarding demand for crude oil and former President Donald Trump’s push to reduce prices through increased production. The price of North Sea Brent crude for February delivery decreased by 0.15%, settling at $73.41, while the American West Texas Intermediate (WTI) for January delivery fell by 0.38% to $70.02. “Despite a modest rise over the past three days, market concerns about supply have led to this downturn,” noted Bart Melek from TD Securities.
Future Oil Demand and Geopolitical Concerns
The outlook for the oil market remains bleak, as highlighted in a report released by the International Energy Agency (IEA) on Thursday. This report predicts a supply surplus of 950,000 barrels per day by 2025, which could escalate to 1.4 million barrels per day if OPEC+ resumes pumping additional barrels into the market as planned by April. This scenario includes a voluntary cut of 2.2 million barrels per day from eight member nations, including key players like Saudi Arabia and Russia, whose return to the market has faced delays. A significant concern for OPEC is the adherence to production targets, with IEA estimates indicating that collective production exceeded these goals by 680,000 barrels per day in November. OPEC has also revised its global oil demand growth expectations for 2024 and 2025 downward, citing ongoing challenges.
Amid these developments, Trump reiterated his commitment to significantly lowering oil prices during his nomination by Time Magazine. His strong support for fossil fuel production is anticipated to create favorable conditions for U.S. producers, potentially leading to an oversupply from the United States. However, the market remains cautious, factoring in the geopolitical landscape, which includes new European Union sanctions targeting Russia, a tenuous ceasefire between Israel and Hezbollah, and ongoing uncertainties regarding Syria’s future, as noted by analysts from Energi Danmark.
Recently, EU member states reached an agreement to impose sanctions on around 50 additional vessels linked to the “ghost fleet,” which facilitates Russian oil exports while bypassing Western restrictions. Analyst Tamas Varga from PVM suggests that sanctions against Russia could provide upward support for oil prices if they result in a reduction in effective exports. Melek further highlights that geopolitical risks are exacerbated by the potential fall of Bashar al-Assad in Syria and the diminished influence of Iran, stating, “With the Assad regime weakened and Iranian proxies no longer serving as a protective buffer, military action against Iranian installations becomes more feasible.”