Oil faces uphill struggle as supply glut worries mount: Reuters poll

A recent Reuters poll indicates oil prices will face an uphill struggle, with Brent crude forecast to average $67.65 per barrel in 2025, driven by an anticipated supply glut. This surplus is attributed to increased OPEC+ production, as the group prioritizes market share, alongside subdued demand growth partly influenced by U.S. tariff threats. Analysts project a significant market surplus in 2025-2026, which is expected to keep prices depressed, despite some underpinning from geopolitical risk.

Analysis

A consensus view from a recent Reuters poll of 31 economists and analysts points to a bearish outlook for crude oil, with significant headwinds limiting price appreciation through 2025. The survey forecasts Brent crude to average $67.65 per barrel in 2025, a negligible change from previous estimates and below the current year's average of approximately $70. This price stagnation is primarily driven by expectations of a substantial market surplus, fueled by the OPEC+ decision to increase production by 547,000 barrels per day in September. Analysts suggest the cartel is prioritizing market share over price support, a strategy expected to create a significant supply glut in 2025 and 2026. On the demand side, growth is projected to be lackluster, with forecasts ranging from 500,000 to 1.1 million bpd, dampened by the economic uncertainty stemming from U.S. tariff policies. While a persistent geopolitical risk premium related to the Russia-Ukraine conflict is expected to provide a floor for prices, most analysts believe alternative suppliers can mitigate disruptions from potential sanctions, thus capping the upside potential. The overall market sentiment is strongly negative, reflecting a fundamental imbalance where supply growth is poised to outpace sluggish demand.

Key Decisions for Investors

• Given the consensus forecast for a supply glut and capped prices, investors should consider a neutral to bearish stance on crude oil and related instruments like USO and BNO, as reflected in the negative per-ticker sentiment.
• Monitor OPEC+ policy closely, as any shift from its current market-share strategy towards a more aggressive production-cutting stance would be a primary catalyst to invalidate the bearish thesis.
• While the base case is bearish, upside risk from geopolitical flare-ups remains; therefore, hedging against sudden price spikes caused by unforeseen supply disruptions, such as an escalation in the Russia-Ukraine conflict, is a prudent risk management strategy.
• Pay attention to global demand indicators and U.S. production figures, as the divergence between the poll's bearish outlook and OPEC's more optimistic demand forecast represents a key uncertainty for price direction.