Oil Set to Fall Below $60 Into Next Year, FGE’s Fesharaki Says

FGE NexantECA Chairman Emeritus Fereidun Fesharaki forecasts oil prices could fall below $60 a barrel into late 2024 and early 2026, despite OPEC+'s recent modest decision to add 137,000 barrels per day next month. This projection is driven by an anticipated market glut, following the cartel's earlier shift away from its long-standing price-shoring efforts.

Analysis

A bearish outlook for crude oil is emerging, with FGE NexantECA's Chairman Emeritus, Fereidun Fesharaki, forecasting that prices could decline below $60 per barrel by the end of 2024 and into early 2026. This projection is underpinned by the anticipation of a significant market glut, a view held despite OPEC+ announcing a relatively modest production increase of 137,000 barrels per day for the upcoming month. The cartel's decision signals caution, yet Fesharaki's forecast suggests it may be insufficient to prevent a price slide. This situation is contextualized by a recent strategic pivot from OPEC+, which had previously abandoned its long-standing policy of actively shoring up prices, thereby setting the stage for potential oversupply.

Key Decisions for Investors

• Investors with long exposure to crude oil should consider hedging strategies or reducing positions in anticipation of a potential price drop below the $60/barrel threshold driven by a looming supply glut.
• A review of holdings in the energy sector, particularly upstream exploration and production companies, is warranted, as their profitability is highly sensitive to falling commodity prices.
• Monitor sectors that benefit from lower energy costs, such as transportation and airlines, for potential buying opportunities should this bearish oil price forecast materialize.
• Closely watch future OPEC+ production decisions, as any further increases beyond the modest 137,000 bpd would reinforce the oversupply narrative and accelerate the downward pressure on prices.