JP Morgan: OPEC + to stand still for the next year, Brent crude may fall to $60 by the end of next year
JPMorgan predicts that OPEC+ will maintain its current production levels over the next year, and Brent oil prices may fall to $60 per barrel by the end of 2025. The bank points out that the current oil prices are unfavorable for both producers and consumers, calling for further reductions in daily production. In addition, the average price forecast for Brent crude oil in the fourth quarter has been lowered from $85 to $80, reflecting weak market demand and inventory issues. Although OPEC+ has postponed production increases, the market's reaction to this decision has been muted, especially against the backdrop of weak gasoline demand
JP Morgan said in a report on Thursday that it expects OPEC+ to maintain at least the current production level for another year, thereby keeping the average price of Brent crude oil in 2025 at $75.
OPEC+ agreed on Thursday to postpone the oil production increase plans for October and November, and will further suspend or reverse the production increase plans when necessary.
JP Morgan stated that the opportunity to gradually cancel production cuts is now closed, and it is expected that by the end of 2025, the price of Brent crude oil will fall to a low of $60 per barrel.
The bank said, "A price of $60 per barrel is not a good price for producers and consumers, if OPEC+ insists on market management, the alliance will need to further cut production by 1 million barrels per day."
JP Morgan stated that as demand is expected to weaken significantly by 2025, the market is now looking for a price point to prevent unnecessary supply from entering with OPEC+.
To reflect the recent decline in oil prices, the bank reduced its average price forecast for Brent crude oil in the fourth quarter of 2024 from $85 to $80 per barrel.
This comes as oil prices hit a 14-month low, due to concerns about demand from the world's largest oil consumer and the potential increase in supply from Libya, offsetting the significant reduction in US inventories and the delayed production increase by OPEC+.
Analysts at US investment bank Jefferies said that OPEC+'s decision will reduce the tightening of oil supply in the fourth quarter by about 100-200,000 barrels per day, which should be enough to prevent inventory accumulation even if demand does not improve.
However, Bob Yawger, director of energy futures at Mizuho Securities, said the market was not satisfied with the news from OPEC+.
"Even without the chaos created by OPEC+, the gasoline market can cause crude oil to plummet. If you don't need gasoline, you don't need crude oil to make gasoline," Yawger said.
After energy companies unexpectedly increased gasoline inventories by 800,000 barrels last week, US gasoline futures fell to their lowest closing level since March 2021.
Andy Lipow, president of Lipow Oil Associates, told CNBC on Thursday, "There are many factors in the coming months that are really unfavorable to OPEC+. They want to see the price of Brent crude oil between $85 and $90 per barrel to balance the budget."
He further explained, "For consumers, we are entering a period of lower demand, most importantly, we are entering the seasonal refinery maintenance period in the US and Europe, which will reduce crude oil demand. In the US, the gasoline driving season has now ended."