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OPEC+ postpones again: Oil prices will continue to fall

Oil faces a bleak macroeconomic outlook for the coming years.

Brent 2025 futures show oil prices hovering around $72 a barrel as weak demand from China and a surplus of crude in the US offset any gains from OPEC+’s plans to slow production recovery. Looking at the big macro picture for oil next year, there are several reasons to believe that prices will be contained:

CHINA

Weak oil demand in China will be the biggest factor driving the projected 1 million barrels per day surplus next year, and that will continue even after the country’s short-term economic woes. China’s crude imports are on track to fall by as much as 4.5 million barrels per day this year, according to customs data compiled by BloombergNEF. Meanwhile, the threat of a trade war between the U.S. and China could further limit oil demand from the world’s second-largest economy.

OPEC+ SUPPLY SUPPLY

The expected reduction in imports from China is more than double the 2.2 million barrels per day that OPEC+ had planned to gradually restore to the market, but those plans have been thwarted by weak demand. The group has now postponed production plans by three months, the third time it has postponed such action.

US AND NON-OPEC+ SUPPLIES

At the same time, US crude oil supplies have reached new highs, as shown by record production last week and the second highest fuel export levels on record. The US currently holds more than 423 million barrels of crude oil in its storage facilities, enough to supply 1.16 million barrels per day for a full year. According to BloombergNEF forecasts, the US alone will add another 0.58 million barrels per day in 2025 compared to this year.
In addition, there is increasing oil supply from other non-OPEC countries, such as Guyana, Canada and Brazil, as expected by the International Energy Agency.

MACRO

A strong dollar makes oil more expensive for importers and slows new demand growth.
President-elect Trump’s proposed 25% import tariffs on Canadian and Mexican oil, the two largest sources of imported oil in the United States, would raise U.S. gasoline prices and reduce demand.
Of course, renewed escalations in wars could lead to sharp price increases. But unless the risk of military disruptions persists, markets will quickly eliminate any geopolitical risk premium, as I have argued before.

Looking ahead to 2025, the global increase in oil supplies is not expected to slow down anytime soon, even if some of the factors listed above do not materialize. And with demand not expected to pick up, oil prices are likely to continue to decline next year.

OPEC+ came, saw and — again — postponed. The decision to delay the production increase plan for another three months was in line with expectations, but it highlights the group’s weak position in a well-supplied global market. Expectations remain for lower oil prices.

The later start of the long-planned easing of restrictions, as well as the longer, more gradual reduction in production, will mean that fewer barrels will be supplied by OPEC+ next year than initially projected. But even after the policy adjustment, most market observers still expect global supply to exceed demand.

From here on, there are several key factors to watch. Next week, new monthly forecasts will be published from OPEC itself, as well as from the International Energy Agency and forecasts from the US government. Expectations here, especially from the MEA, are likely to remain unchanged, with warnings of too much oil supply relative to demand expectations.

With that in mind, there is also a clear risk of further signs of slowing consumption in China. Trade data due next Tuesday could again show reduced import volumes, although the annual Central Economic Work Conference could provide some positive macro news. In the US, crude oil inventories should increase both this quarter and next, in line with seasonal trends. And in the futures market, it is important to monitor the structure of the curve, as its inverted nature — a positive trend — could weaken.

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