The oil market is experiencing a collapse of confidence. Major Institutions are continuously lowering their forecasts, and all signals are telling the market: it is not yet at the bottom.
In recent weeks, against the backdrop of tariff turbulence, oil Analysts have been scrambling to cut their forecasts for demand and prices, highlighting the threat that Trump's Trade war poses to the Global economy.
According to the average of 12 estimates compiled by Bloomberg, so far, Banks, consultants, and Institutions have lowered their expectations for daily Consumer volumes this year by 0.32 million barrels.
This reduction is equivalent to about one-third of the demand growth in good years, indicating that the oversupply in the second half of the year will exceed previous expectations. Analysts state that Crude Oil Product is now priced based on economic weakness.
Last week, Brent Crude Oil Futures fell below $60 per barrel, marking a four-year low, as traders grappled with the dual blow of increased OPEC+ supplies and the Global Trade war potentially weakening demand. Although prices have slightly rebounded since then, they remain down approximately 20% from earlier peaks this year.
As Analysts and traders rapidly revised their views, Wall Street investment banks lowered their oil price forecasts, and the International Energy Agency (IEA) also issued a warning of deteriorating market prospects. Bulls are no longer as aggressive, and bears now believe that oil prices will drop more quickly.
Citigroup Analysts, including Francesco Martoccia, wrote in a report: 'We have recently brought forward our Put expectations for the second half of 2025. Demand may be subdued for a while due to the USA's imposition of Trade tariffs.'
Earlier this month, Goldman Sachs lowered its forecast for Brent Crude Oil prices twice in one week, estimating the price at $62 by the end of this year. Morgan Stanley and UBS Group have also cut their forecasts. Most of the demand reductions are concentrated in the second half of the year, when the full impact of the Trade measures is expected to hit Consumer. These demand risks have increased the prospect of expanding supply surpluses, even though some have curtailed expectations for US supply growth this year.
Despite the IEA and the US Energy Information Administration (EIA) lowering production forecasts, the weak demand outlook means that both Institutions believe that the surplus in 2025 will be larger than a month ago, while OPEC expects the supply deficit to shrink. These figures were derived after OPEC+ announced significant production increases earlier this month.
However, traders are struggling with a Futures curve that is sending mixed signals. The curve indicates a bearish pattern for trading in the coming months, suggesting weakening Consumer expectations, while the trades on the front end show the opposite pattern, indicating supply tightness.
Analysts at Energy Aspects, including Amrita Sen, wrote in a report this week: "Oil prices have begun to fall into a recession." They revised down their daily demand forecast for the second half of the year by 0.45 million barrels. "The question now is, how long can the front end hold while economies are in confrontation – historically, this has not been good news for demand and the global economy as a whole."
