In a report sent to Rigzone by the Macquarie team late Wednesday, Macquarie strategists revealed that they expect oil prices “to test new lows” in 2025.
“Marginal sources of increased supply risk as a result of President Trump’s re-election may include increased Israeli military aggressiveness toward Iran and more intense Ukrainian attacks in Russia, which may eventually result in a disruption of Russian oil exports,” Macquarie strategists stated in the report.
“We view these risks as low probability and would be surprised if oil supply is disrupted. As a result, we expect oil prices to test new lows next year as geopolitical risk subsides and bearish fundamental factors take great weight,” they added.
In the report, the strategists noted that, last week, Brent fell around $3 per barrel “as the Chinese stimulus announcement disappointed and OPEC decreased their surprisingly optimistic demand projections for the fourth consecutive month”.
“Corroborating price action, managed money length fell with WTI and Brent summing to a 46K decrease in contract equivalents after building large length the prior week,” the strategists said.
The Macquarie strategists highlighted in the report that price has settled into a $5 per barrel range in the last month “as the market has struggled to break out”.
“In addition to a lack of non-geopolitical catalysts, the market appears to be implying that large expected surplus balances in 2025 are now fairly priced, driven by weak demand of one million barrels per day and large global supply growth,” they added.
“Similar to previous weeks, geopolitical tensions have mostly covered last week’s losses as Russia-Ukraine comes back into focus. Price continues to face resistance at the 50D MA of $74,” they continued.
The strategists outlined in the report that, over the last week, WTI net length dropped by 13.4K and Brent dropped by 23.2K.
“WTI spec net length fell as the liquidation of longs overwhelmed new short interest. Brent saw a bigger move with over 25 times the addition of shorts as the decrease in longs,” the strategists said.
“Following a week of a 77.3K managed money net length build, this past week demonstrated a combined drop of 45.9K for the category as over half the previous’ weeks move was reversed,” they added.
“Lastly, commercial participants exhibited matching flows and combined for an increase of 42.7K contracts as refiners potentially look to hedge forward margins with bearish demand catalysts outweighing bullish ones,” they went on to state.
In a market analysis sent to Rigzone on Wednesday, Terence Hove, Financial Markets Strategist Consultant to Exness, noted that “crude oil futures rebounded for the third consecutive day, recovering to a certain extent from recent lows”.
“The market found some support in increasing geopolitical concerns and signs of increased demand,” he added.
“The ongoing escalation of the Ukraine conflict could affect the market as traders assess the possible developments. The potential disruption of Russian oil exports could fuel some supply concerns,” he continued.
Hove noted in the analysis that, “a recovery in Chinese oil demand, with crude imports expected to reach near-record levels by November’s end, could contribute to a more bullish sentiment”.
He added, however, that “Iraq’s fuel oil exports are set to reach record levels in 2024, driven by increased shipments and reduced domestic demand”.
“This surge could contribute in dampening the market’s prospects as the rise in oil exports could ease prices,” Hove warned.
In a separate market analysis sent to Rigzone on Wednesday, Samer Hasn, Senior Market Analyst at XS.com, said “this week’s rebound in oil prices comes amid concerns that the escalating conflict on the Russian-Ukrainian front could spiral out of control, potentially disrupting crude supplies”.
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