JP Morgan sees crude oil falling to $60s by 2025 despite all the tension in West Asia

Crude oil prices are expected to fluctuate in the coming years, with a potential rise to $80 per barrel in the last quarter of 2024, before dipping to the low $60s by the end of 2025, according to a report by JP Morgan. 

The report attributes the current volatility to geopolitical tensions in West Asia, but notes that key players in the region, such as Saudi Arabia and the UAE, have strong economic incentives to keep the conflict contained.

“The current situation suggests a sustained geopolitical premium in crude prices until the conflict is resolved in the short term,” said Natasha Kaneva, JP Morgan’s head of global commodities strategy.

Crude oil prices have seen a steady rise, with Brent crude moving from $71 per barrel in late September to nearly $81 in early October, only to drop back to around $73 as demand concerns surfaced. Analysts also highlight weak demand from major economies like China and the U.S., contributing to the downward pressure on prices. Rabobank International expects the market to be oversupplied by about 700,000 barrels per day (bpd) in 2025, which could drive prices lower.

Petroleum Minister, Hardeep Singh Puri, remains confident about the country’s ability to manage crude supplies despite geopolitical concerns. “There is no shortage of oil,” Puri said at a recent event, adding that additional supplies from Brazil and Guyana are helping to stabilize the market. He also acknowledged that while geopolitical tensions can inflate costs due to higher freight and insurance, India’s crude needs will be met. India imports over 85% of its crude oil, making price stability crucial for managing inflation and fuel costs domestically.

Key points from the JP Morgan and Rabobank reports:

• 2024 Price Forecast: Crude prices are expected to reach $80 per barrel in Q4 2024 due to geopolitical tensions.
• 2025 Price Outlook: Prices could dip to the low $60s by the end of 2025, driven by weak demand and an oversupplied market.
• Supply Concerns: Global oil inventories are at their lowest since 2017, but additional supplies from countries like Brazil and Guyana are expected to ease pressure.
• Geopolitical Risks: Tensions in West Asia, particularly concerning Israel and Iran, could cause price spikes, especially if the Strait of Hormuz, a key oil transit route, is disrupted.
• While JP Morgan and Rabobank forecast an oversupplied market by 2025, the Energy Information Administration (EIA) has revised its 2025 global oil demand forecast down by 300,000 bpd, now expecting demand to reach 104.3 million bpd. OPEC has also cut its demand growth projections for 2024 and 2025, citing weaker consumption globally.

Puri emphasized that despite these fluctuations, India’s energy security remains intact, pointing to India’s preparedness in managing any disruptions to global oil supplies.