Oil Undervalued Amidst Market Shortfall

27 Nov 2024 , 01:19 PM

The chiefs of commodities research at Goldman Sachs and Morgan Stanley told Reuters that oil prices are low because of a market imbalance and the potential threat to Iran’s production from future sanctions under U.S. President-elect Donald Trump.

China and the U.S. are expected to continue replenishing strategic stocks for energy security, Reuters reported, adding that the oil market is believed to have been in a deficit of roughly half a million barrels per day during the past year.

According to them, these elements might raise oil prices in the near future, combined with decreased production from OPEC+ producers and a possible tightening of sanctions on Iran that could reduce supply by about a million barrels per day.

There is a lot of spare capacity to handle supply shortfalls when necessary, so Brent is expected to peak at roughly $78 a barrel by next June before falling to $71 by 2026, according to Reuters report.

After Israel and Hezbollah reached a ceasefire agreement, Brent crude futures are trading below $73 per barrel on Wednesday. Meanwhile, OPEC+ is debating delaying the end of output limits.

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