The oil market fundamentals are currently bearish, despite the easing of geopolitical tensions.
The conflict in the Middle East initially raised concerns about oil supply disruptions, but those risks have subsided.
The subdued outlook for oil prices is due to easing geopolitical tensions and a decline in global demand, particularly from China. UBS has revised its forecast for global oil demand growth, lowering the estimate for 2024. This adjustment reflects changes in fuel consumption patterns, including the increasing adoption of electric vehicles. UBS expects a marginal improvement in demand growth for 2025.
On the supply side, non-OPEC+ countries, especially the United States, are expected to maintain high production levels. However, US crude oil production is facing challenges due to stagnating rig activity. UBS has revised its forecasts for US crude oil production downward. OPEC+ production levels have also been adjusted, but compliance with production targets remains inconsistent. UBS does not anticipate a return of OPEC+ supply to the market until at least 2027.
The oil market is navigating through a landscape marked by geopolitical uncertainties and shifting demand dynamics.