Global oil prices have dropped to $60 per barrel, marking a four-month low. While there have been minor fluctuations, the overall trend remains downward. The primary reason is an oversupply, as OPEC and other producers increase output amid slowing demand.
OPEC announced a production increase of 500,000 barrels per day in November, tripling the amount added in October. Saudi Arabia aims to regain market share, growing weary of prolonged production restrictions. This surplus oil has been accumulating in global reserves for six consecutive months.
US oil stocks have also risen higher than anticipated, mainly due to reduced exports and weak demand. Additionally, economic concerns in China have suppressed genuine domestic oil demand, even as imports remain high.
In Russia, many refineries have been halted by Ukrainian strikes, leading to domestic fuel shortages. As a result, Russia has increased crude oil exports via Baltic ports, adding further to the global oil glut.
Venezuela has likewise raised exports, capitalizing on demand from China, the US, and India. Worldwide, growing oil demand is concentrated in developing countries, though growth is much slower than in previous years.
Oil price forecasts remain pessimistic: by year-end, prices could fall to $59 per barrel, and at the start of next year to $49-50 — the lowest since 2020.
Consumers benefit from cheap oil as it lowers fuel and transport costs while slowing inflation. For producing countries, however, low prices threaten budget deficits and cutbacks in investment.
The main factor for future price movements is the balance between supply and demand. Without new geopolitical shocks, prices are expected to continue falling, with the oversupply lasting until at least mid-next year.
