Wells Fargo Oil Market Outlook

Wells Fargo analysts predict a shift in global oil market dynamics by mid-2025, forecasting improved fundamentals and stronger prices following a period of oversupply.

Key Predictions

• Surplus Estimate: 1 million barrels per day (mmbpd) in the first half of 2025, despite OPEC+ production cuts.
• Price Risks: Downside price risks exceed upside ones until mid-2025, but better conditions expected in the latter half of the year.
• Long-term Price Projections: $80 for Brent and $75 for WTI, supported by decreasing U.S. shale production and Saudi Arabia's preference for prices above $70 per barrel.

Market Influencers

• U.S. Shale Output: Minimal growth at 0.3 mmbpd YTD; structural changes in the industry are restraining excessive production growth.
• OPEC+ Strategy: Expected to prioritize price stability through disciplined production management, with a tendency to support oil prices.
• Geopolitical Uncertainties: Global demand trends, trade tensions, and potential geopolitical conflicts remain uncertain factors.

Potential Policy Impacts

• Significant impacts could arise from U.S. policies under a second Trump administration, particularly related to sanctions on Iran, possibly cutting Iran's oil exports by up to 1.4 mmbpd.

Wells Fargo remains optimistic about a gradual market recovery, with an expectation of an improved demand-supply balance and higher oil prices by the latter half of 2025.