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Crude Oil Futures Plummet: OPEC+ Decision Fails to Alleviate Supply-Demand Worries
Crude oil futures are facing significant weekly losses due to OPEC+ postponing a production hike, raising concerns of supply exceeding demand.
Weekly Losses in Oil Futures
Crude oil futures are facing significant challenges as OPEC+'s decision to postpone a production hike has failed to alleviate concerns over a potential supply-demand imbalance. The Brent global benchmark has seen a substantial decline of 7.2%, marking its most substantial weekly drop since October 2023. Similarly, the U.S. benchmark has experienced a decrease of 5.4%, marking its worst week since early May.
Impending Supply Increase
OPEC+ had planned to increase production by 180,000 barrels per day until December, a move that would introduce approximately 2.2 million barrels per day back into the market until the end of next year. However, this intended output hike comes at a time when oil demand is reportedly slowing in China, attributed to the country's rapid transition to electric vehicles.
Decline in Energy Prices
As energy prices reflect this shifting market landscape, the following values were observed on Friday:
- West Texas Intermediate October contract: $69.43 per barrel, a rise of 63 cents (0.4%). Year-to-date, U.S. crude has seen a 5.5% decline.
- Brent November contract: $72.97 per barrel, an increase of 28 cents (0.39%). Year-to-date, the global benchmark has experienced a 7.3% decline.
- RBOB Gasoline October contract: $1.94 per gallon, an increase of 2 cents (1.04%). Year-to-date, gasoline has noted a 7.4% pullback.
- Natural Gas October contract: $2.24 per thousand cubic feet, with minimal change. Year-to-date, gas has witnessed a 10.5% drop.
Revised Forecasts
In light of these market developments, financial institutions are adjusting their oil price forecasts. Bank of America has revised its 2025 forecast for
Brent to $75, down from the previous estimate of $80. Similarly, the forecast for the U.S. benchmark decreased to $71 from the earlier projection of $75. On the other hand, Citi anticipates Brent prices to average in the $60 range next year, as the market is expected to enter a substantial surplus.
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