Oil prices could fall below $60 per barrel by the end of the year as OPEC+ continues to unwind production, analysts say after the group began rolling back the last layer of output cuts.
On Sunday, the eight OPEC+ producers – Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman – tapped the 1.65 million barrels per day (bpd) cuts announced in April 2023. The producers will return 137,000 bpd of these cuts to the market in October, “in view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories,” OPEC said this weekend.
Despite the small rollback, analysts expect an oversupply later this year and early next year, which is set to weigh on oil prices.
“I would say below $60 in the first quarter of next year is possible, mid-$50s is definitely possible, and then that will have a big impact on the US shale production,” Fereidun Fesharaki, chairman emeritus at FGE NexantECA, told Bloomberg Television on Monday.
“We have not seen the real impact of this unwinding as yet,” the expert added.
Next year, supply growth is set to be lower due to the lower oil prices, but a decline in production would lay the foundations of a renewed boost to prices later in 2026, according to Fesharaki.
Early on Monday in Asian trading, oil prices rose by 1.6% as the market was expecting a larger production hike from OPEC+.
If prices don’t drop too much, the group could be emboldened to accelerate the unwinding of the cuts, as it did earlier this year with the 2.2-million-bpd cuts, Fesharaki said.
“Until you actually see inventories building up, then there will be no impact on the prices,” the oil market expert told Bloomberg.
Even before the latest OPEC+ output increase, Wall Street was expecting prices to fall below $60 per barrel in the coming months.
The market consensus appears to be that the strong summer demand is at its peak, and come the fourth quarter, global oil consumption will slow, and rising supply will overwhelm the market.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com
