Crude Oil WTI Futures rebounded Tuesday, following a slump a day earlier when major oil producers announced plans to ramp up production in the coming months, but the bears may soon retake the reins, Scotiabank (TSX:BNS) says, warning of a supply surplus.
"The latest OPEC+ June quota increase of another 411,000 barrels per day will further pressure the already weakened oil market," Scotiabank analysts said in a recent note.
The analysts expect that as Saudi Arabia ramps up production to its new quota, global supply could exceed demand by up to 1 million barrels per day for the rest of 2025 and into 2026.
While the new quota increase still falls short of actual March production levels, Scotiabank forecasts that the decision will nonetheless lead to a sharp output increase-primarily from Saudi Arabia.
"Outside the Kingdom, however, we don't think Algeria, Oman and Russia will be able to raise their output much from current levels. On the other hand, we also don't expect other members, particularly among the large quota busters such as Kazakhstan, Iraq and UAE, will adhere to their new quota and compensation plan by reducing production," the analysts said.
Scotiabank highlights that compliance remains a challenge, with some members such as Kazakhstan, Iraq and the UAE likely to continue overproducing despite official targets. "We are skeptical that these three countries will have the political willingness to cut their production that steep [in the] absence [of] another sharp plunge of oil prices," it added.
With this bearish backdrop and expectations for a supply surplus, Scotiabank believes that "the oil market probably will not bottom until late 2025/early 2026 at the earliest."
For major producers to reverse course on current production plans, a much further slump in prices may be needed.
Brent prices may need to fall into the $40s or below before "the Fear factor fully kicks in and forces all members back to the negotiation table to settle respective production disputes," the analysts said.
Until then, Scotiabank warned that "there is higher risk of the market to overshoot on the downside over the next 12 months."
Source: Investing.com
Oil prices rose on Friday after a Ukrainian drone attack suspended loadings from the largest port in western Russia, but gains were capped by concerns about U.S. demand. Brent crude futures settled a...
Oil prices continued their rally amid growing concerns that Ukrainian drone attacks could disrupt oil flows through Russia's two most important crude export hubs on the Baltic coast. Brent crude rose...
Oil prices held steady on Friday (September 12th) as concerns about oversupply and weakening U.S. demand offset the risk of supply disruptions stemming from conflicts in the Middle East and Ukraine. ...
Oil held a decline after the International Energy Agency projected an even bigger surplus next year, with the bearish outlook offsetting concerns about geopolitical tensions from the Middle East ...
Oil prices slid about 2% on Thursday on concerns over softening U.S. demand and broad oversupply that offset threats to output from the conflict in the Middle East and the war in Ukraine. Brent crude...
EUR/USD remains steady during the North American session on Friday, poised to end the week with modest gains of over 0.18% as traders brace for the next week's monetary policy decision by the Federal Reserve (Fed). At the time of writing, the pair...
U.S. Treasury Secretary Scott Bessent met with BlackRock Inc executive Rick Rieder in New York on Friday, as the Trump administration continued its search for a new chair for the Federal Reserve, a source familiar with the matter said. Bessent has...
Oil prices rose on Friday after a Ukrainian drone attack suspended loadings from the largest port in western Russia, but gains were capped by concerns about U.S. demand. Brent crude futures settled at $66.99 a barrel, up 62 cents, or 0.93%. U.S....
The International Monetary Fund on Thursday said the Federal Reserve has scope to lower interest rates because of the weakening U.S. labor market,...
The Federal Reserve is likely to start a series of interest-rate cuts next week and keep going through the end of the year, traders bet on Wednesday...
Annual inflation in the United States (US), as measured by changes in the Consumer Price Index (CPI), rose to 2.9% in August from 2.7% in July, the...
The S&P 500 notched a second straight record-high close on Wednesday, as Oracle surged and cooler-than-expected inflation data supported...