Investing.com — The market is poised for a significant correction in the fourth quarter of 2024, driven primarily by increasing supply/demand gluts. Although oil prices are recovering from previous lows, fundamental data suggests the market is heading for a downturn, Macquarie analysts wrote in a note on Monday.
The core of this forecast is rooted in the expected increase in production in key regions around the world. As production increases, it is expected to exceed demand, creating a surplus that is likely to put downward pressure on prices.
Even as the global economy shows signs of recovery, oil demand remains tepid, especially compared to growing supply. This imbalance is expected to become even more apparent as we get closer to the end of the year.
Moreover, global oil supplies are likely to increase as supply continues to exceed consumption. Historically, such inventory builds have been a clear signal of impending price declines because they reflect an oversupplied market struggling to find equilibrium.
While geopolitical factors often play a role in supporting oil prices, Macquarie suggests that the current geopolitical landscape does not provide sufficient risk to offset growing supply and demand imbalances.
Without significant geopolitical disruptions, fundamentals are expected to dominate, causing prices to fall.
“Ultimately, we expect a correction in the fourth quarter of 2024 as SD/D surpluses increase,” the analysts said. As the supply glut becomes more apparent and demand remains weak, the market is expected to regain its recent gains.
The correction could deepen further as the market adjusts to these new dynamics, potentially leading to a sustained period of lower prices.
