OPEC in its latest report maintains its oil demand and supply projections for 2025. The current escalation of the conflict in the Middle East does not seem to have affected the cartel's projections, which continue to point to shortages in the crude market. OPEC has also not changed its expectations of an economic slowdown in China, despite the announcement of significant government support there.
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OPEC raport
OPEC forecasts global oil shortages, predicting a 1.6 per cent increase in crude consumption in 2025, while production is expected to grow by only 1.2 per cent. Shortages could reach as much as 2.5 per cent of total consumption. In such a scenario, they would be nearly 2 times higher than during the post-pandemic recovery. India is expected to lead consumption growth. However, OPEC's projections may not fully reflect current economic data. In the wake of the Iranian missile attack on Israel, the price of oil has risen by more than 10 per cent. At the last OPEC+ (OPEC plus Russia) meeting, the decision was taken to maintain production restrictions.
Source: Conotoxia own study, OPEC data
Current oil market situation
OPEC has been maintaining production cuts for many months in order to boost crude prices. However, numerous sources indicate that these limits are not being respected by all cartel members, as reported by Saudi Arabia's energy minister. Currently, the price of Brent crude is $73 per barrel, while Saudi Arabia, as OPEC's largest member, needs at least $85 to meet its economic plans. As tensions in the region escalate and some OPEC countries fail to comply with production limits, Saudi Arabia may have to increase production to maintain its market share. Despite the escalation of conflict in the Middle East, the situation in oil markets remains stable and a significant increase in prices would require a major supply disruption.
Source: Conotoxia MT5, XBRUSD, Daily
Oil price development forecasts
Currently, the oil price is approaching $80 per barrel. However, Conotoxia Ltd experts believe that fears of a recession in the United States are overestimated by the market, OPEC projections do not reflect a potential economic recovery in China, and yet shortages are forecast for this market. Therefore, in the baseline scenario, Conotoxia’s analysts assume a continuation of oil price increases, with the possibility of exceeding $90 per barrel by the end of this year.
Grzegorz Dróżdż, CIIA, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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