Wall Street financial services company UBS has cut its oil price forecasts for the period 2024-2026, citing weaker global demand and a more stable supply outlook. The analysts have lowered the forecast for average Brent crude oil in 2024 by $4 to $80 per barrel, with the forecast for Q4 2024 lowered to $75 per barrel from $83.

UBS now sees Brent averaging $75 per barrel in both 2025 and 2026, a $5 per barrel reduction. The analysts have suggested that OPEC+ will be forced to postpone the unwinding of its voluntary production cuts, with any meaningful increases now seen coming in 2027 or 2028, compared to earlier expectations of a return by mid-2025. 

The latest oil price rally continued on Monday’s session despite crude production in the Gulf of Mexico resuming following disruptions caused by Hurricane Francine. Brent crude for November delivery was up 1.3% at 11.50 am ET to trade at $72.56/barrel while WTI crude for October delivery was up 1.0% to change hands at $69.66/barrel.

Last week, commodity experts at Standard Chartered reported that oil markets are overlooking the imminent removal of even more barrels from the markets in the coming months. Back in July, Russia, Iraq and Kazakhstan submitted their compensation plans to the OPEC Secretariat for overproduced crude volumes for the first six months of 2024. According to OPEC, the entire over-produced volumes will be fully compensated for over the next 15 months through September 2025, with Russia ‘paying back’ a cumulative 480 kb/d, Iraq 1,184 kb/d and Kazakhstan 620 kb/d. According to StanChart, the compensatory output cuts by the three OPEC members work out to a combined 370 kb/d reduction in October, and then an amount varying between 162 kb/d and 206 kb/d for November 2024 through to September 2025. StanChart has worked out that adding the compensation schedule to the recently announced reduction in targets due to delaying the implementation of tapering will result in OPEC production clocking in at 530 kb/d lower in Q4-2024; 540 kb/d lower in Q1 and Q2-2025 and 560 kb/d lower in Q3-2025, if all commitments are kept.

By Alex Kimani for Oilprice.com

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