According to analysts at Citi, Brent crude oil prices are expected to see a boost in the near-term as demand may exceed supply in the fourth quarter. The decision by OPEC+ to delay output cuts, coupled with ongoing supply disruptions in Libya, could lead to a market deficit of 0.4 million barrels per day in the last three months of 2024.
This trend could push oil prices into the $70 to $75 per barrel range, with additional support from a potential rebound in Chinese demand. However, analysts predict a return to price weakness in 2025, with Brent potentially dropping to $60 per barrel due to an anticipated surplus of one million barrels per day.
On Thursday, crude prices rose after the US Federal Reserve announced a significant interest rate cut. While lower rates typically stimulate economic activity, concerns over global demand persisted. The Brent contract increased by 0.9% to $74.34 per barrel, while WTI futures traded 1.0% higher at $70.58 per barrel.
The Fed's decision to cut rates by 50 basis points was aimed at boosting the economy amid inflation concerns. However, some worries about a slowdown in growth emerged. Despite Fed Chair Jerome Powell's reassurance, the central bank's intention to maintain higher rates in the medium-to-long term was highlighted.
In addition, US government data revealed a larger-than-expected draw in inventories, attributed to lower imports and production. The impact of Hurricane Francine on crude output also contributed to the inventory decline. While the drawdown was significant, builds in distillates and gasoline inventories raised concerns about cooling fuel demand.
In summary, the oil market is expected to face a supply shortage in Q4, leading to higher prices. The Fed's rate cut aims to stimulate economic growth, but concerns over global demand persist. It is crucial for investors to monitor these developments closely to make informed decisions about their portfolios.