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Oil Prices Could Plunge to $40 in 2025 if OPEC Unwinds Production Cuts, Analysts Predict

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Oil prices could drop significantly, possibly reaching as low as $40 per barrel in 2025, if OPEC+ reverses its current output cuts, according to market analysts who foresee a challenging period ahead for crude. Tom Kloza, OPIS’ global head of energy analysis, notes that concerns over 2025 oil prices are more pronounced than in recent years. A complete unwinding of OPEC+ cuts could result in a steep price drop due to rising supply without matching demand, Kloza stated.

Currently, global oil prices remain stable, with Brent crude trading at around $72 per barrel and U.S. West Texas Intermediate at approximately $68. However, Henning Gloystein from Eurasia Group anticipates that if OPEC+ fully reverts to pre-cut production levels, crude prices could indeed fall sharply, especially given expectations of only modest demand growth of about 1 million barrels per day next year. Saul Kavonic, senior energy analyst at MST Marquee, echoed this, suggesting that a sudden lift of cuts might trigger a price war over market share, pushing prices down to levels seen during the COVID-19 pandemic.

OPEC+ has been maintaining voluntary production cuts to stabilize prices, with a recent extension of these cuts. In September, the group delayed its plan to reduce the 2.2 million barrels per day voluntary cuts until December, aiming to prevent further price declines amid tepid demand from China, the world’s second-largest oil consumer. Additionally, OPEC lowered its 2025 demand growth forecast to 1.5 million barrels per day, acknowledging slower-than-expected economic recovery and oversupply risks due to increased output from non-OPEC producers like the U.S., Canada, Guyana, and Brazil.

Despite this, market analysts predict an overall bearish trend for oil next year, with a potential build-up in oil inventories. Citibank’s Martoccia Francesco highlighted that the oil surplus could reach 1.6 million barrels per day if OPEC+ adheres to its current plan. Citi’s forecast suggests Brent crude prices may average $60 per barrel in 2024.

Adding to the uncertainty, U.S. President-elect Donald Trump’s administration could influence global oil markets. Trump’s “drill baby drill” energy policy, aimed at boosting U.S. oil production and reducing energy prices, may further pressure global oil prices. Analysts suggest that if Trump pushes for lower retail gasoline prices, oil prices would need to drop to $40 or below to meet that goal. Current gasoline prices, however, remain favorable for both consumers and producers, with the national average around $3 per gallon, noted Matt Smith, lead oil analyst at Kpler.

 

China’s Exports Surge by 8.7% in August, Exceeding Expectations

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China’s exports witnessed a significant increase of 8.7% year-on-year in August, surpassing the 6.5% growth predicted by a Reuters poll, according to data from the country’s customs agency. Imports, on the other hand, grew by only 0.5%, falling short of the 2% growth expected. In July, China’s exports rose by 7%, while imports outpaced predictions with a 7.2% increase.

China’s exports to its key trading partners—the U.S., the European Union, and the Association of Southeast Asian Nations (ASEAN)—also showed growth in August, with exports to the EU rising by 13%, the highest among these partners. The U.S. saw a 12% rise in imports from China, while imports from the EU fell. Meanwhile, imports from ASEAN increased by 5%.

In trade with Russia, China’s imports declined by 1%, whereas exports to Russia grew by 10%. The month also saw China’s exports of cars and ships surge by nearly 40%, while smartphone exports rose by 6.7%. Other sectors, like suitcase exports, saw a growth of 9%, and integrated circuits showed an 18% rise in exports, with imports climbing by 11%.

Despite this growth, the rare earths trade exhibited a decline, with rare earth exports falling by 1% and imports dropping by 12% in August. This decrease followed China’s recent policy to increase oversight of its rare earth industry for national security reasons. China also announced export controls on antimony, set to take effect later in September. Additionally, crude oil imports fell by 7% in volume during August.

In yuan terms, year-to-date exports increased by 6.9%, while imports grew by 4.7%. Exports have been a strong point for China amidst ongoing struggles to stimulate domestic demand. However, China faces growing trade tensions with the U.S. and EU, with tariffs on Chinese electric cars and other goods adding pressure.

 

Houthis Launch Missile and Drone Attacks on Two Oil Tankers in Red Sea, US Military Labels Them ‘Terrorist Acts’

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In a dangerous escalation, Yemen’s Houthi rebels targeted two crude oil tankers, the Saudi-flagged Amjad and the Panama-flagged Blue Lagoon I, in the Red Sea on Monday. The attacks, which the U.S. military described as “reckless acts of terrorism,” involved ballistic missiles and drones. The Houthis claimed responsibility for hitting the Blue Lagoon I with multiple missiles and drones, although they did not acknowledge the strike on the Saudi tanker.

The Amjad, laden with two million barrels of oil, and the Blue Lagoon I, carrying up to one million barrels, were attacked as they sailed near each other. Fortunately, neither vessel sustained major damage, and no casualties were reported, allowing both ships to continue their journeys.

The strikes are the latest in a series of Houthi attacks on maritime targets, which have alarmed Saudi Arabia and international maritime forces. Since November, the Houthis have intensified assaults in the region, sinking two vessels, seizing another, and killing three seafarers. The group, backed by Iran, claims to be acting in support of Palestinians amidst the ongoing conflict in Gaza.

The attacks underscore the Houthis’ growing capability to target critical shipping lanes and escalate tensions in the region, further complicating the already fragile security landscape in the Middle East. Despite the damage being minimal this time, the assaults highlight the ongoing threat to international oil shipping and regional stability posed by the conflict in Yemen.

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