BAKU, Azerbaijan, October 30. In its latest report, the World Bank outlines both upside and downside risks to oil prices for the coming years, pointing to geopolitical factors and potential market oversupply as primary forces shaping future prices, Trend reports.
While oil prices are forecast to average $80 per barrel in 2024, the report emphasizes that unforeseen developments could create significant deviations from these projections.
Upside Risks: Middle East Tensions and Stronger Demand in China
The World Bank notes that the risk of escalating tensions in the Middle East could have a profound impact on global oil markets, with potential disruptions pushing Brent crude prices to $92 per barrel by late 2024. A shock reducing global output by 2 million barrels per day (mb/d)—equivalent to about 2% of global production—would sharply increase prices. Although other producers may respond by increasing output, prices would likely remain elevated, with Brent expected to average $84 per barrel in 2025 under this scenario, which is 15% above the baseline forecast.
Additional upside pressure could arise from lower-than-expected production in U.S. shale fields, due to challenges such as rising operational costs and a slowdown in shale expansions. Similarly, stronger-than-anticipated oil demand in China could drive prices upward. Should China’s recent stimulus measures stimulate higher industrial and transportation sector demand, oil consumption could grow faster than anticipated, pushing prices beyond current forecasts.
Downside Risks: Oversupply from OPEC+ and Global Economic Slowdown
While geopolitical factors pose upside risks, the World Bank also sees a high potential for a significant oversupply of oil if OPEC+ moves forward with scheduled production increases and demand remains modest. Under this scenario, global oil supply in 2025 would exceed demand by 2.5%, leading to a substantial price drop. Brent crude could average $66 per barrel, falling 10% below the baseline and about 18% lower than the projected 2024 average. An oversupply could prompt delays in new production projects, particularly in regions like Brazil, Canada, and Guyana, while U.S. shale producers, despite recent profitability improvements, may also reduce extraction if prices stay low.
Further downside risks stem from weaker-than-expected economic growth, especially in China, where economic challenges in the property sector and sluggish consumer confidence could impact oil demand. With China’s economic growth facing persistent headwinds, any significant downturn could reduce oil consumption, leading to further price declines in 2025 and 2026.
These contrasting risks underscore the complexities facing the global oil market in the near term, with price trajectories highly sensitive to both regional stability and the balance of supply and demand. The World Bank’s projections suggest that sustained market volatility is likely, driven by a mix of geopolitical, economic, and supply-side factors.
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