Try as OPEC and its allies have done, crude oil prices have stubbornly failed to make any sustained forays past the US$90 per barrel mark with the benchmark Brent crude price tending to stick closer towards the US$80/bbl point.

This was despite the oil lobby deciding earlier this month to extend voluntary cuts of 1.65 million barrels per day until the end of December 2025 as well as additional voluntary cuts of 2.2MMbbl/d until the end of September 2024 and then phasing it out gradually on a monthly basis until the end of September 2025.

Impacts brought about by geopolitical tensions – namely the Gaza conflict – also appeared to have been offset by the US Federal Reserve’s decision to delay rate cuts, an indication that inflation is still very much a concern.

Inflation of course threatens consumer appetite and that appetite includes the thirst for oil with high costs likely to make consumers think twice about travelling – a theory backed by US gasoline stocks rising more than expected by 2.6MMbbl to 233.5MMbbl last week.

Crude stocks in the US have also risen unexpectedly by 3.7MMbbl to 459.7MMbbl.

Bears on the oil hunt

Worse might be coming for those hoping that oil can still reach loftier heights.

Citigroup’s global commodities team said that crude oil had been mostly range bound, and forecast that prices could drop significantly in 2025.

It noted that while short-term volatility might result in some upside risk, the bearish long-term trend could see Brent crude fall to US$60/bbl, which is assuredly the last thing that OPEC+ wants to see.

This is due in no small part to Citi’s expectation that there will be a surplus in the crude market despite the oil cartel’s efforts.

The International Energy Agency certainly seems to think the same.

It noted earlier this week in its Oil 2024 report that slowing demand growth as energy transitions advance and surging supply would see oil markets comfortably supplied through to 2030.

The report also found that gains from fast-growing economies in Asia, as well as from the aviation and petrochemicals sector would increasingly be offset by factors such as rising electric car sales, fuel efficiency improvements in conventional vehicles, declining use of oil for electricity generation and structural economic shifts.

Oil production is expected to climb thanks to the US shale oil sector and other producers in the Americas, leading to levels of spare capacity never seen before other than at the height of the Covid-19 lockdowns in 2020.

A look forward

Will the IEA and Citi’s predictions come true? Or will crude make prove its mettle nad make gains?

There is every chance that stocks could indeed build and oil prices fall as a result.

It is also possible that OPEC+ make a decision to not just extend its voluntary cuts but also increase the volumes – this is admittedly a low likelihood given that the oil countries are reliant on the petrodollar.

There is only so much they can cut before it eats into their bottom line and there are some who think they have already reached that point.

Given this, it is more than likely that oil will indeed go into surplus though US$60/bbl oil might be a little unlikely.