For long traders in crude oil trading, last week was a painful week: both US and Brent crude hit new lows since June 2023 last Friday, with WTI crude oil futures for October falling 2.14% last Friday and accumulating 7.99% last week, hitting a new closing low since June 2023; The November Brent crude oil futures contract fell 2.21% last Friday, with a cumulative drop of 9.82% last week, also hitting a new low since June 2023.
The reasons that drag down oil prices come from two aspects: on the one hand, the supply of crude oil from the United States and OPEC+seems to continue to increase; On the other hand, it seems difficult for both China and the United States to increase their oil demand.
Looking ahead to the future of oil prices, it seems that the clouds are even darker. Both the world's largest independent oil trader, Vitol Group, and Wall Street firm Morgan Stanley have issued pessimistic warnings.
China's oil demand is about to reach its peak
Recently, the world's largest independent oil trader, Vitol Group, stated that due to China's energy transition, gasoline usage in China will peak, further exacerbating concerns about oversupply of oil.
As the world's largest oil importer, China's oil demand is an important factor affecting global oil supply and demand, and therefore receives close attention from market participants.
China's gasoline demand may peak this year or next - not because no one drives, but because mainstream models are slowly shifting towards electric vehicles, "Russell Hardy, CEO of Vito Group, said in an interview.
At the same time, US crude oil production is approaching historical highs, and the OPEC+alliance is brewing its plans to increase production - although OPEC+has recently postponed its plans for two months due to concerns about market supply and demand. In summary, Vitol Group believes that the market supply will be sufficient for at least the next two years.
&Amp; quot; People are coming to the conclusion that unless there is a supply shock, the next 12 months will not be an easy environment for them; quot; Hardy said that currently, the market is not too concerned about the supply in 2025 and 2026.
Vitol Group predicts that global oil demand will peak in the 1930s, and the growth of global oil demand in the coming years will remain quite strong. However, he also expects that China's gasoline and diesel demand will begin to show signs of fatigue, as China's oil vehicles are being replaced by electric cars and LNG fuel trucks.
Hardy predicts that global oil demand growth will decline from 1.65 million barrels per day this year to approximately 1.1 million barrels per day next year, with the majority of the growth coming from developing countries.
In the previous two years, due to the impact of the COVID-19 and the Russia-Ukraine conflict, the global oil market was once in great turmoil. And now, Hardy points out that this chaotic period is gradually coming to an end.
He said, "This year's market is more organized, stable, and trade flows and patterns are more predictable... Volatility has returned to a level closer to the mean
Several investment banks have lowered their oil price expectations
On the other hand, Morgan Stanley lowered its Brent crude oil price forecast on Monday this week - the second time in recent weeks that Morgan Stanley has lowered its oil price expectations - due to intensified demand challenges while supply remains abundant.
According to a report by analysts Martijn Rats and others, Morgan Stanley expects the global benchmark oil price to average $75 per barrel in the fourth quarter. As a comparison, earlier this year's expectation was $85, while last month, Morgan Stanley had just lowered its expectation to $80.
In addition to concerns about weak demand from China, recent signals of a possible slowdown in the US economy have also raised concerns among analysts. The non farm payroll reports released by the United States in the past two months have fallen short of expectations and have been revised downwards, causing concerns in the market that the risk of a US economic recession may exceed expectations.
The recent trend of oil prices is similar to other periods of relatively weak demand, "wrote a report by a Morgan Stanley analyst
In fact, Morgan Stanley is not the only one on Wall Street concerned about the outlook for oil prices - Goldman Sachs also lowered its oil price expectations last month. Citigroup recently stated that the market appears to be oversupplied, and unless OPEC+further reduces production, oil prices may average $60 per barrel by 2025.