Commodity prices have fallen and are at around US$60; Swiss group maintains neutral view
Partially stagnant demand, mainly in the West and China, combined with rising production in the Americas, should increase oil supply from the end of the year.
Even so, the Swiss group Julius Baer maintains a neutral view on the energy commodity, according to a note released this Thursday (September 5, 2024). Prices are expected to remain at US$ 70 per barrel in the long term. The scenario would lead to production surpluses in 2025.
The recent fall in the oil market, with prices of the commodity in recent days falling to around US$60 per barrel, was reportedly motivated by news of a faster-than-expected return of Libya’s reduced production, with the decline being exacerbated by operations in hedge.
“The conflict-torn country is currently embroiled in political turmoil over the leadership of the central bank, which governs oil revenues. Libya is not a major but still significant oil producer, accounting for more than 1% or 1.2 million barrels per day of global supply, of which about half is currently in short supply.said Norbert Rücker, head of economics and new generation research at Julius Baer.
COULD OIL FALL FURTHER?
After prices reached around US$60 per barrel, but showed improvement, Julius Baer expects them to be around US$70 per barrel in the long term.
Investors are watching closely to see whether OPEC+ (Organization of the Petroleum Exporting Countries and allies) might reconsider increasing production to give oil prices a boost. However, the decision may influence market share.
Rücker understands that shale oil production would likely stagnate or even reverse with prices at $60 per barrel. Which, in his understanding, would eliminate the surplus.
“The shale business has surprised with faster-than-expected productivity growth and, consequently, partial deflation of production costs so far this year”he stated.
Oil-producing countries, according to Rücker, should postpone or reduce their promises to phase out supply cuts. These will depend on market conditions.
“However, such an announcement is not necessarily bullish for prices, as the market may point to persistently large available production capacity.”said the expert, who understands that producing countries do not tend to give up market share.
With information from Investing Brazil.
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