Investing.com — Oil prices are expected to hit new lows next year, according to Macquarie, as the market appears to be pricing in a large crude surplus while the demand outlook is bleak.
“We expect oil prices to test new lows next year as geopolitical risk fades and bearish fundamentals gain significant weight,” Macquarie said in a recent note.
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Oil fell 0.8% to $68.87 per barrel, closing in on its 52-week low of $65.27 per barrel.
The has stabilized in a range of $5 per barrel over the past month, as forecasts of a large surplus balance in 2025, due to weak demand growth of 1 million barrels per day and growth substantial increase in global supply, prevented any potential increase.
Weak Chinese demand is weighing heavily on the demand outlook as Beijing's recent efforts to boost growth have failed to deliver.
Last week, Brent fell by around $3 a barrel as Chinese stimulus announcements disappointed, Macquarie said, adding that OPEC's forecasts for falling demand in the second quarter also weighed.
“In China, the plan announced following the National People's Congress (NPC) meeting earlier this month was disappointing, as approval of a major tax program did not occur,” Macquarie said .
Recent geopolitical tensions, particularly the conflict between Russia and Ukraine, have helped support oil prices. But the risk of a disruption in oil supplies due to heightened tensions is low, suggesting that geopolitics-related support is on borrowed time.
