Investing.com — Oil prices are shaping up to test new lows next year, Macquarie said, as the market appears to be pricing in a large surplus of crude at a time when the outlook for demand looks bleak.
“We expect oil prices to hit new lows next year as geopolitical risk recedes and bearish fundamentals take over,” Macquarie said in a recent note.
Down 0.8% at $68.87 per barrel, moving closer to a 52-week low of $65.27 per barrel.
has settled at a level of $5 per barrel last month as expectations for a large surplus by 2025, driven by weak demand growth of 1 million barrels per day and substantial global supply growth, undermine any potential upside have limited.
Weak Chinese demand is a major drag on demand prospects as Beijing’s recent attempts to boost growth have failed to make an impact.
Last week Brent fell about $3 a barrel as Chinese stimulus announcements disappointed, Macquarie said, adding that OPEC’s forecast for weaker demand in the second quarter also weighed.
“China, the plan announced after the National People’s Congress (NPC) meeting earlier this month was disappointing as it failed to approve a major budget package,” Macquarie said.
Recent geopolitical tensions, especially the conflict between Russia and Ukraine, have helped support oil prices. But the risk of oil supply disruption due to increased tensions is low, suggesting geopolitical support is on borrowed time.
