Goldman Sachs predicts that oil prices will average $76 per barrel in 2025 due to a good supply of oil

Goldman Sachs predicts that oil prices will average $76 per barrel in 2025 due to a good supply of oil

Goldman Sachs said on Tuesday that oil prices are likely to stay around $76 per barrel in 2025. This is because there will be a small extra supply of oil, big producers will have enough spare capacity, and there are fewer worries about disruptions in oil exports from Iran.

Oil Prices in 2025

Goldman Sachs shared its thoughts on oil prices for 2025, saying they expect prices to stay between $70 and $85 per barrel. However, they think there’s a higher chance prices might go down, due to:

• High spare capacity (extra oil supply that could be used if needed).
• Trade tariffs that could hurt the economy and reduce oil demand.

At the same time, the bank sees some chance that prices could increase by the end of the year, as they believe markets are underestimating how tight the oil supply might get.

Even though there is plenty of spare capacity and Iran’s oil production has not been disrupted, Goldman says there’s no guarantee that too much supply (a glut) will flood the market in 2025.

The report also points out that tensions between Israel and Iran have not affected oil supply from the region so far, and OPEC+ countries (like Saudi Arabia and Russia) still have a lot of spare capacity.

However, if the Middle East conflict drags on, there is a risk that oil supplies could be disrupted, which would tighten the market and push prices higher.

Oil Down

Oil prices fell on Wednesday after reports showed that U.S. crude oil reserves increased more than expected. However, the drop in prices was limited due to ongoing diplomatic efforts to end Israel’s attacks on Gaza and Lebanon.

By 9:40 am AST, Brent crude oil prices decreased by 29 cents (0.4%) to $75.74 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude dropped by 30 cents (0.5%) to $71.45 per barrel.

Despite the drop, oil prices had risen earlier this week in the previous two trading sessions.

Analysts at ING said the market is waiting for Israel’s response to Iran’s recent missile attack. They also noted that Tuesday’s price rise may have been linked to U.S. Secretary of State Antony Blinken’s visit to Israel, which did not result in any clear outcomes.

A senior U.S. official mentioned that Blinken had long discussions with Israeli Prime Minister Benjamin Netanyahu and other leaders, urging them to allow more humanitarian aid to Gaza.

On Tuesday, Israel announced it had killed Hashem Safieddine, who was expected to succeed Hezbollah leader Hassan Nasrallah, killed last month in an Israeli attack on the Iran-backed group.

Market strategist Yeap Jun Rong said investors expect the Middle East conflict to continue, which could delay a ceasefire deal.

He added that China’s recent economic stimulus efforts might help improve conditions and boost oil demand in the future.

Meanwhile, U.S. crude oil stocks rose by 1.64 million barrels last week, far more than the 300,000-barrel increase analysts had predicted, which also put pressure on prices.

IEA Forecasts

The International Energy Agency (IEA) said in October that it expects the world to have more oil than needed by 2025—unless something major happens to disrupt oil production or supply chains. This extra supply is helped by large oil reserves, which include over 1.2 million barrels of crude oil stored by governments and another 500,000 barrels kept by industries as required.

“For now, oil is flowing smoothly, and unless a big disruption occurs, the market will likely have more oil than it needs next year,” the IEA reported.

Important number

1.93 million barrels per day (bpd): This is how much global oil demand is expected to grow in 2024, according to OPEC. They lowered this forecast from their earlier estimate of 2.03 million bpd growth.

Published: 23rd October 2024

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