Pessimism sweeps the oil market! If OPEC+ cancels production cuts, oil prices could plummet to $40 by 2025.

It was understood that, with OPEC lowering global oil demand growth expectations for the fourth consecutive month, as well as the gradual acceptance by traders of the "oil oversupply by 2025" view led by Wall Street major banks, commodity investment institutions widely hold a deeply pessimistic outlook on the price prospects for 2025, especially for Brent crude oil and WTI crude oil prices, in the current crude oil, gasoline, heavy diesel and other refined oil futures trading markets. Goldman Sachs, a major Wall Street bank, predicts that under the trend of oil oversupply, next year's international benchmark crude oil price, Brent crude oil futures price, could drop to as low as $61. However, some commodity market analysts are even more pessimistic about the outlook for Brent crude oil prices, suggesting that if the global oil-producing alliance "OPEC+" lifts the existing voluntary production cuts, oil prices for 2025 could potentially plummet to $40, and in the most pessimistic scenario, could drop to $30, predicting a long-term bear market for the oil trading market in the coming year. Therefore, some analysts suggest that, with Brent crude oil prices, as well as the North American crude oil pricing benchmark, WTI crude oil prices, persistently weak in the long term, compared to a comprehensive and immediate removal of voluntary production cuts, the "OPEC+" oil-producing alliance led by Saudi Arabia and Russia is more likely to start gradually easing oil production cuts at the beginning of next year. "Since the Arab Spring, the sense of concern about the future oil prices for the next year is much stronger than any year before - that is, more pessimistic than any year in my memory." said Tom Kloza, Global Head of Energy Analysis at oil price information service firm OPIS. OPEC has lowered oil demand expectations for the fourth consecutive time! Oil prices may plummet to $40? "If the oil export organization OPEC relaxes production controls and fails to reach any substantive agreement to control output, international oil prices could plummet to $40 per barrel, and in the most pessimistic scenario could drop to $30. And for many years, their share in the entire oil market has indeed been continuously shrinking," Kloza added. If oil prices in 2025 really fall to the extreme negative level of $40 per barrel, it means that the current soft oil prices will plunge by about 40%. The global crude benchmark, Brent crude oil, currently hovers around $72 per barrel in futures trading, while the North American crude pricing benchmark, WTI crude oil futures prices, hovers around $68 per barrel. With OPEC lowering oil demand expectations for both crude oil and various refined oil products processed from crude oil for the fourth consecutive month, OPEC has completely given up the strong bullish forecasts it has held for global oil demand since this year. OPEC announced on Tuesday that it has lowered its expected growth rate for global oil demand in 2024, and has also lowered its expectations for global oil demand next year, emphasizing the softening demand in China, India, and other important regions. The gloomy global outlook for oil demand also highlights the challenges faced by the "OPEC+" oil-producing organization, which is made up of all members of the oil-exporting organization OPEC and important oil-producing countries such as Russia. Earlier this month, against the backdrop of the continuing sharp decline in the international benchmark crude oil price, Brent crude oil futures prices, OPEC+ delayed its plan to increase oil production starting in December as expected by the market. In the monthly oil demand report released on Tuesday, the oil-exporting organization OPEC stated that it expects global oil demand in 2024 to increase by 1.82 million barrels per day, lower than the growth rate of 1.93 million barrels per day predicted by the organization last month, and also lowered its expectations for global oil demand in 2025 from 1.64 million barrels per day to 1.54 million barrels per day. Since setting the expected growth rate of global oil demand for 2024 in July 2023, OPEC has maintained the same expectation until August, when it started lowering the growth rate expectations for 2024 and 2025 in the monthly reports, resulting in four consecutive reductions by the time the November report was released. Oil prices have fallen sharply since July as tensions in the Middle East eased significantly, signs of easing in the Russia-Ukraine conflict appeared, a significant increase in US crude supply, and OPEC and the IEA recently significantly lowered oil demand expectations. Brent crude oil futures prices have dropped more than 18% since July, hovering near lows seen earlier this year, indicating that even as the Fed announced the start of rate cuts, market funds are still bearish on the remaining year and next year's global oil demand growth. Hennig Grosser, Director of Energy, Climate, and Resources at Eurasia Group, said in a media interview that considering that the growth rate of oil demand next year may not exceed 1 million barrels per day, the full removal of oil production cuts by "OPEC+" in 2025 "will undoubtedly lead to a sharp drop in oil prices, and may even fall to $40 per barrel." Similarly, Sol Cavonich, Senior Energy Analyst at MST Marquee, believes that if the oil-exporting organization OPEC ignores demand and lifts production cuts, "this is actually like a price war for market share, which could lead to oil prices dropping to the lowest point since the COVID-19 pandemic." Some analysts suggest that given the already very weak trend in oil prices, compared to a comprehensive and immediate removal of cuts, the oil-producing alliance is more likely to start gradually easing cuts at the beginning of next year. OPEC+ has been implementing self-discipline measures to maintain its voluntary production cuts, and has even extended them. In September, OPEC+ postponed its plan to extend voluntary production cuts of up to 2.2 million barrels per day by two months to curb the downward trend in oil prices. The voluntary production cuts of 2.2 million barrels per day implemented in the second and third quarters were originally scheduled to expire at the end of September. Earlier this month, the "OPEC+" oil-producing alliance led by Saudi Arabia and Russia decided once again to extend the production cuts, postponing the voluntary production cuts until the end of December. Weak oil prices and a significant drop in oil demand are mainly due to the negative impact brought by the weakened demand from major Asian demand countries such as China and India. China and India are the world's core economies and the largest crude oil importing countries. ""Overcapacity" is gradually becoming a reality, with a strong expectation of falling oil prices in the market for 2025.Grosstein emphasized that the crude oil futures price is under huge selling pressure, mainly due to the obvious shift towards oversupply in the entire oil market. The oversupply in 2025 may be even more severe, especially with major oil-producing countries outside the OPEC alliance, such as the United States, Canada, Guyana, and Brazil, planning to increase supply. In October, the International Energy Agency (IEA), one of the authoritative institutions in the energy field, released a more pessimistic demand forecast report than OPEC, predicting a significant "supply surplus" in the global oil market in the new year, 2025. Reports recently published by Wall Street giants Morgan Stanley and Goldman Sachs both indicate that as early as the end of 2024 or early 2025, the entire oil market may shift from a slightly tense supply-demand balance to a potential trend of oversupply. Goldman even predicts that Brent crude oil prices may fall to a temporary low of $61 per barrel. Matosia Francisco, an energy strategist from Citigroup, stated that traders generally believe that next year, overall oil inventories, including crude oil and refined oil products, will "substantially" increase. "If oil producer groups insist on implementing their production increase plans, the scale of oversupply in the oil market may nearly double...reaching around 1.6 million barrels per day," said Citigroup strategist Francisco. Even if "OPEC+" does not relax voluntary production cuts, Citigroup remains bearish on the trend of crude oil prices in 2025. Francisco's Citigroup strategy team predicts that the average trading price of Brent crude oil next year may sharply fall to $60 per barrel, which is basically in line with Goldman's pessimistic forecast. Many analysts recently stated that the upcoming presidency of elected President Donald Trump has further intensified bearish sentiment in the crude oil market. They believe that Trump's return to the White House may lead to escalated commodity trade wars and greater efforts to push American oil giants to increase production after withdrawing from the Paris Agreement, leading to continued sharp declines in oil prices. Closer from OPIS said: "If we really start a escalated trade war - many economists believe this kind of trade war is possible, especially targeting China, we may see a significant drop in oil prices.". Trump also praised the "drill baby drill" production policy for U.S. oil and gas giants such as ExxonMobil and Chevron, vowing to halve energy prices, especially the gasoline prices consumed on a large scale in the United States. Matt Smith, Chief Oil Analyst from Kpler, stated that if gasoline prices at the retail end are halved, international crude oil prices would "need to fall below $40 per barrel". Smith added that currently, the retail gasoline price in the United States is at the "sweet spot" of $3 per gallon, consumers do not feel burdened, and the investment price for oil and gas exploration companies is still reasonable.