Oil prices likely to see more than 10% dip in 2025 as supply surplus emerges: BofA

Investing.com -- Oil prices are likely to drop 10% from current levels in 2025, weighed down by a wave of supply that will likely outpace demand, analysts at BofA said in a recent note. 

Crude Oil WTI Futures crude to average $61 per barrel next year, with WisdomTree Brent Crude Oil (LON:BRNT ) at $65 per barrel, representing a more than 10% from current prices for both contracts.

A rise in non-OPEC supply and sluggish global growth are at the heart of the analysts' bearish outlook, which calls for a surplus in 2025.

Supply to grow by 1.4M barrels per day, led by non-OPEC+ producers such as the U.S., Argentina, Brazil, and Guyana, the analysts forecast. While demand is forecast to rise by just 0.8M barrels per day amid global GDP growth of 3.3%.

“Given the oversupply narrative for 2025, it is hard to build a bullish case for oil prices,” the analysts said, adding that OPEC+ is likely to maintain voluntary production cuts unless demand surprises to the upside or supply disruptions occur.

Energy producers, however, are likely to weather the storm from falling prices, the analysts said, underpinned by the "strong balance sheets and disciplined capital spending."

While the analysts urge caution on the energy sector heading into 2025, they believe the expected slump in oil prices could create attractive buying opportunities later in the year.  

"[T]hough we expect weaker fundamentals, we are not worried about the financial viability of the industry and do not foresee a wave of downgrades if oil prices end up lower than our forecasts," the analysts said.

Source: Investing.com