Iran representative: OPEC+ has little room to restore oil supplies

The Zhitong Finance App learned that Iran's representative in OPEC said that there is little room for OPEC+ to resume previous production cuts. These production cuts have already triggered a wave of competitive supply in the US shale oil industry. Iran's OPEC+ governor Afshin Javan said: “This price-supporting strategy has actually encouraged increased supply outside of OPEC, particularly the US.” “This will leave limited room for OPEC+ to ease restrictions.”

OPEC+ will meet in early December. Market observers, including Citigroup and J.P. Morgan, doubt whether OPEC+ will continue to increase production next year. They warned that the impending oversupply has pushed crude oil prices down to $60 per barrel, and oil prices may fall further if OPEC increases production. Oil market observers expect OPEC+ will once again delay production increases.

Afshin Javan warned that the OPEC+ plan to increase supply “could cause an oversupply in 2025.” He said that over the past four years, OPEC+ production cuts have funded a surge in the supply of shale oil in the US, and since 2020, US shale oil production has climbed to 2 million barrels per day.

It is worth mentioning that OPEC announced earlier this month that it would lower its forecast for the growth rate of global oil demand in 2024, and also lowered the organization's forecast for global crude oil demand next year. This is the fourth month in a row that OPEC has lowered its forecast for global oil demand growth.

At the same time, the “oil oversupply in 2025” view is gradually being accepted by traders. Regarding the current crude oil and futures trading markets for refined oil products such as gasoline and heavy diesel, commodity investment institutions are generally deeply pessimistic about the price outlook for 2025, especially the price prospects for Brent crude oil and WTI crude oil.

Citigroup Energy strategist Matosia Francisco said that market traders generally believe that overall oil stocks, including crude oil and refined oil products, will increase “drastically” next year. “If oil producer groups stick to their plans to increase production, the scale of oversupply in the oil market may nearly double to about 1.6 million barrels per day.”

Wall Street bank Goldman Sachs predicts that under the trend of oil oversupply, the international crude oil price benchmark, the Brent crude oil futures price, may drop as low as $61 next year. However, some commodity market analysts are more pessimistic about Brent crude oil price trends than Goldman Sachs. Tom Closer, head of global energy analysis from the oil price information service OPIS, said that if OPEC+ lifts existing voluntary production cuts, crude oil prices may drop sharply to $40 in 2025, and may plummet to $30 in the most pessimistic situation, and he predicts that the crude oil trading market will show a long-term bear market in the next year.