Analysts expect higher oil prices next year due to OPEC's stance

The price of oil is likely to be higher in the coming months than previously expected. That is the view of analysts revising their price outlook after the Organization of the Petroleum Exporting Countries (OPEC) decided not to increase production for now. Analysts at Morgan Stanley believe a barrel of North Sea Brent crude will average 70 dollars next year, Reuters reported.

Brent prices are a key benchmark for the global market. Analysts also expect the oil surplus on the market to be smaller than they thought until recently. Morgan Stanley had previously forecast an average Brent price of 66 to 68 dollars per barrel next year. Analysts at HSBC had forecast an average of 70 dollars and are sticking with that estimate for now. Brent is currently trading just above 70 dollars per barrel.

The OPEC+ group, which includes OPEC and its allies led by Russia, announced on Thursday that it would start increasing oil production later than previously stated. It is currently limiting production to support prices, and plans to make its first increase only in April next year. That is three months later than under the previous plan. It will also phase out production limits more slowly, keeping them in place until September 2026. That is nine months longer than previously stated.

Morgan Stanley has lowered its forecast for oil production by the cartel's nine members by 400,000 barrels per day next year and by 700,000 barrels per day by the fourth quarter of next year. This covers OPEC members excluding Iran, Libya and Venezuela, countries that were exempted from the oil production cuts agreement. The bank has also lowered its forecast for Iranian oil production by around 100,000 barrels per day by the end of next year.

HSBC expects the oil surplus on the market to reach 0.2 million barrels per day next year if OPEC+ decides to start increasing production only in April. HSBC had previously forecast a market surplus of 0.5 million barrels per day.

Analysts at Bank of America expect Brent to average 65 dollars per barrel next year. Their estimate assumes that OPEC+ will not significantly increase production next year.

„Demand growth slowed this year and is expected to remain weak in 2025. The market will therefore move into surplus next year,“ the bank said.

It said the weak demand outlook was OPEC+'s Achilles' heel. The bank's analysts forecast global oil demand growth averaging one million barrels per day this year and 1.1 million barrels per day next year.