Noor Trends News, Technical Analysis, Educational Tools and Recommendations
Oil prices slid on Friday, marking a weekly drop of over 3%, as the easing of geopolitical tensions and expectations of increased supply in 2025 overshadowed ongoing production cuts by OPEC+. The market continues to grapple with mixed signals, balancing near-term output restrictions with forecasts of a supply surplus in the coming years.
Geopolitical Risk Premium Shrinks Amid Middle East Ceasefire
The fragile ceasefire between Israel and Hezbollah has eased concerns over potential supply disruptions from the Middle East, a key oil-producing region. Despite reported ceasefire violations and ongoing tensions, the truce has significantly reduced oil’s geopolitical risk premium. Brent crude dropped 0.6% to $72.83 per barrel, while U.S. West Texas Intermediate (WTI) fell 0.2% to $68.68 as of Friday midday. Over the week, Brent lost 3%, and WTI fell 3.7%.
Ample Supply Anticipated in 2025
The International Energy Agency (IEA) forecasts a substantial increase in global oil supply by 2025, with a potential surplus of over 1 million barrels per day (bpd), equivalent to more than 1% of global production. This projection is weighing heavily on long-term oil price expectations, further pressuring the market.
OPEC+, which includes the Organization of the Petroleum Exporting Countries and its allies like Russia, has delayed its policy meeting to December 5. The group is widely expected to extend production cuts to stabilize prices, though concerns over future supply persist.
Price Outlook: Downward Revisions Continue
Market sentiment remains bearish, with Brent crude’s average price forecast for 2025 being revised downward for the seventh consecutive month. Analysts polled by Reuters now expect Brent to average $74.53 per barrel in 2025, reflecting cautious expectations amid a potential oversupply scenario.
Short-Term Market Drivers
In the near term, oil prices are likely to remain sensitive to developments in the Middle East and the upcoming OPEC+ meeting. The group’s decision on extending production cuts will be critical in shaping market dynamics through early 2024. Additionally, U.S. inventory data and any unexpected shifts in demand or supply could drive volatility.
Oil markets are navigating a period of significant uncertainty. While OPEC+ remains committed to managing near-term supply, the prospect of a 2025 surplus and easing geopolitical risks are curbing price gains. Traders and policymakers alike will closely watch the December 5 OPEC+ meeting for signals about the group’s strategy in balancing immediate challenges with longer-term pressures.
