Oil Market Outlook: Surplus, Geopolitical Tensions, and Demand Slump Impacting Prices
Oil prices face pressure from growing global supply amid weaker demand, with Brent crude projected to decline to $80 per barrel in 2024, followed by further drops to $73 in 2025 and $72 in 2026, according to the World Bank’s October 2024 Commodity Markets Outlook.
Amid heightened geopolitical risks, oil prices spiked in early October, only to retract by month’s end. Weakening demand, especially in China, where consumption fell by 0.3 million barrels per day (mb/d) in Q3 2024, is driven by a slowing economy and rising adoption of alternative fuel technologies, including electric vehicles and liquefied natural gas-powered trucks.
Global supply, however, continues to rise, driven by production gains in Latin America and advanced economies. By 2025, oil supply is forecast to exceed demand by around 1.2 mb/d, creating one of the largest surpluses in recent history. Such a surplus could dampen the effects of geopolitical tensions on prices, as high spare capacity remains available to counter disruptions.
Key risks to the forecast include potential escalations in the Middle East, which could cause prices to surge, potentially peaking at $92/bbl. Meanwhile, OPEC+ may prioritize market share over price stability, potentially reversing voluntary cuts of 2.2 mb/d by 2025. This would contribute to an already saturated market, with Brent prices possibly falling as low as $66/bbl, 10% below the baseline projection.
The World Bank’s forecast highlights the uncertainty in the global oil market, shaped by complex supply-demand dynamics and shifting geopolitical landscapes.
