New Delhi,dec 17
The global oil market is projected to return to surplus in 2025, even as OPEC+ extends supply cuts to stabilize prices, according to an ING report.This surplus, though modest, is expected to exert downward pressure on oil prices, with Brent crude likely to average around USD 71 per barrel next year.However, various risks, including geopolitical tensions and potential changes in sanctions enforcement, could disrupt these projections.The surplus forecast for 2025 has been revised downwards from over 1 million barrels per day (b/d) to approximately 500,000 b/d, following OPEC+’s decision to delay the return of 2.2 million b/d of voluntary cuts.Non-OPEC supply is anticipated to grow by 1.4 million b/d in 2025, outpacing demand growth, which is estimated at under 1 million b/d.While OPEC+’s extended cuts may provide a temporary floor to prices, the market is expected to remain under pressure due to surplus conditions.OPEC+ surprised markets in December by slowing the pace of supply increases, planning to take 18 months instead of 12 to reinstate the 2.2 million b/d of cuts.
Despite this move, the group faces challenges, including maintaining compliance among members. Lower prices reduce revenues, putting fiscal budgets in the Middle East under strain and risking a breakdown in cohesion.
Historical instances, such as the 2020 Saudi-Russia price war, highlight the potential for market disruptions if members fail to adhere to agreed production targets.
Geopolitical instability in the Middle East remains a significant concern, though the market has become somewhat immune to developments unless actual supply disruptions occur.
OPEC’s spare production capacity, exceeding 5 million b/d, provides a buffer for potential disruptions. However, much of this capacity is concentrated in the Persian Gulf, making it vulnerable if flows through the Strait of Hormuz are disrupted.
