Oil Hits 2-Month Low, Drops Below $73 Per Barrel
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Brent crude oil futures dropped below $73 per barrel on Wednesday, approaching their lowest point since late December 2024.
This decline is attributed to a combination of factors affecting both supply and demand dynamics in the global oil market.
The potential for a Russia-Ukraine peace deal has emerged as a significant bearish factor for oil prices.
Bank of America analysts suggest that such an agreement could lead to a $5 to $10 per barrel reduction in Brent crude prices.
This is primarily due to the possibility of lifting sanctions on Russia, which would allow Russian crude to flow more freely into the global market, potentially increasing supply.
Adding to the downward pressure, the United States and Ukraine have made progress on a draft minerals deal, seen as a crucial step in President Trump’s efforts to swiftly conclude the conflict.
This development has further fuelled expectations of increased global oil supply.
Concerns about global economic growth have also weighed on oil prices.
President Trump’s recent announcement of tariffs on imports from China, and the potential for similar measures against Canada and Mexico, has raised fears of a slowdown in global economic activity.
This could potentially dampen future energy demand.
Despite these bearish factors, the US Energy Information Administration (EIA) reported an unexpected decrease in US crude inventories last week, with stocks falling by 2.33 million barrels.
However, this bullish data was offset by increases in gasoline and distillate inventories, as well as a 1.2 million barrel rise in stocks at the Cushing, Oklahoma hub.
Looking ahead, Wood Mackenzie forecasts Brent crude to average $73 per barrel in 2025, with prices expected to decline throughout the year from $77 per barrel in Q1 to $70 per barrel in Q4.
This projection takes into account the delicate balance OPEC+ must maintain in managing supply to stabilise the market.
As geopolitical tensions ease and supply concerns diminish, the oil market may face continued pressure in the near term.
However, the situation remains fluid, with potential for volatility as markets adjust to evolving global economic conditions and geopolitical developments.
Sources: Trading Economics, MarketScreener
