According to analysts at HSBC, OPEC+’s reported plan to increase oil output from Dec. 1 could lead to a quicker-than-expected increase in supply to the market, potentially putting pressure on crude prices.
If the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, confirm these reports, it would signal the end of a period where the producer group restricted around 3.4 million barrels per day from October 2022.
The analysts at HSBC stated that the earlier return of OPEC+ barrels is seen as bearish, with expectations of the oil market being in a surplus of roughly 600,000 barrels per day next year. They also mentioned that over the medium-term, the oil market appears to be oversupplied as OPEC+ has limited room to reverse remaining cuts.
As a result of these factors, HSBC has lowered their price forecasts for oil in 2025 and beyond, reducing them from $76.5 per barrel to $70 per barrel.
On Tuesday, oil prices experienced a sharp decline as concerns about weak demand growth overshadowed fears of escalating tensions in the Middle East that could impact global supply. By 06:10 ET, the Brent contract dropped 1% to $71.02 per barrel, while WTI futures traded 1.2% lower at $67.36 per barrel.
Despite reports of limited raids against Hezbollah targets in Lebanon by Israel, which could potentially escalate conflicts in the oil-rich Middle East, the market impact was minimal. This was attributed to a significant decrease in Chinese manufacturing activity in September, indicating a potential slowdown in future demand from the world’s largest crude importer.
Investors will be keeping an eye on the American Petroleum Institute’s upcoming weekly estimate of US crude oil and fuel stockpiles for the week ending Sept. 27.