Our team of skilled analysts, by utilising the depth and breadth of Onyx's proprietary data, position ourselves at the cutting edge of market analysis. This unique vantage point grants us an unparalleled perspective in the market, enabling us to identify emerging trends and lucrative opportunities.

Brent Forecast Review: 20th December 2024

2 min read

The front-month (Feb’25) Brent is on track for a weekly decline, as price action has fallen by 2% to $72.50/bbl by 13:30 GMT (time of writing). Various factors have pressured crude prices this week, including more hawkish signals from the US Federal Reserve and worries about demand. In this review, we will discuss the following factors:

  • Stronger US dollar
  • Chinese demand concerns
  • Bearish global oil balances for 2025

While the Fed lowered interest rates by 25bps as was widely expected, it signalled a more hawkish outlook for 2025, which supported the dollar to its highest level in two years. Notably, Jerome Powell said policymakers can “be more cautious” about future rate adjustments. The Fed’s dot plot now projects only two rate cuts in 2025, compared to prior forecasts of four rate cuts. US inflation has been sticky, and there are concerns about the inflationary impact of President-elect Trump’s proposed trade policies. The median projection for inflation at the end of 2025 has jumped to 2.5% from 2.1% in September. Higher yields boosted the dollar, which has pressured currencies around the world, and MSCI’s Index of emerging countries has also hit a four-month low. Unsurprisingly, a stronger dollar exerted downward pressure on dollar-denominated risk assets like oil. This week’s FOMC meeting underscores the macroeconomic environment’s significant influence on crude prices, a trend expected to endure and shape oil markets as we head into 2025.

This week, Chinese state oil major Sinopec predicted peak oil demand in China in 2027, reinforcing the bearish Chinese demand narrative. Its annual report, published by the Sinopec Economics & Development Research Institute, highlighted that the country’s gasoline demand had peaked last year, and the decline would accelerate as the shift to electric vehicles quickens. Both gasoline and diesel demand are expected to decline in 2025. However, the decline in transport fuels is cushioned by increasing demand for petrochemicals and jet fuel. The report reiterated last year’s forecast that China’s oil demand would peak at around 800 million tons a year no later than 2027. The Sinopec report echoes CNPC’s last week, which mentioned that China’s oil demand may peak in 2025, five years earlier than expected. China’s oil demand woes were a sore point for crude prices this year, and this could persist into 2025 due to its accelerating energy transition, the threat of US tariffs, and the extent to which its stimulus measures will boost consumption.

Another factor weighing on oil prices is the bearish crude forecasts from various investment banks. Given the non-OPEC+ growth in supply from the US, Brazil, and Guyana, the oil market is expected to be well-supplied and see a surplus in 2025. In its monthly report, the IEA forecasts a 950kb/d surplus in 2025, while JP Morgan forecasts a 1.2mb/d surplus. Similarly, our Onyx global oil balance for 2025 shows global implied stock builds averaging out to 1.1mb/d, partly due to the uncertainty surrounding the measurement of OPEC crude supply, namely for Iraq and the UAE.  

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Our team of skilled analysts, by utilising the depth and breadth of Onyx's proprietary data, position ourselves at the cutting edge of market analysis. This unique vantage point grants us an unparalleled perspective in the market, enabling us to identify emerging trends and lucrative opportunities.