Production growth puts pressure on oil: prices could fall below $60 by year-end

Wall Street analysts predict that oil futures will fall below $60 per barrel by the end of the year amid a sharp increase in production by OPEC+ countries and the restoration of the cartel's share in the global market. BNP Paribas revised its Brent price forecast by almost 10%, while Exxon and Shell warned of lower quarterly profits against this background.

Analysts at BNP Paribas have lowered their forecast for the price of Brent crude oil from $60 to $55 by the end of the year, but are confident that quotes will recover in 2026. "The main driver will be lower supply growth from both OPEC and non-OPEC," they emphasized in a statement from Yahoo Finance.

OPEC+ countries, which voluntarily limited oil production by 2.2 million barrels per day at the end of 2023, are now phasing out these limits. Over the weekend, the alliance announced a production increase of 548,000 bpd since August. This is the fourth consecutive monthly increase, and it was more significant than many market participants had anticipated.

According to RBC Capital's estimate, the OPEC+ decision will bring back to the market almost 80% of the previously imposed cut. Nevertheless, so far the actual production increase has remained less than announced, analysts point out.

"Saturday's announced acceleration of the production ramp-up signals OPEC+'s strategic shift toward normalizing capacity and strengthening its market position, which contributes to domestic cohesion and puts pressure on U.S. shale production," concluded Goldman Sachs analysts led by Dan Straven.

They still expect robust demand, mainly from China, the world's largest oil importer, and allowed that OPEC+ will increase production again in September. The investment bank maintained its forecast for the Brent price at $59 a barrel in the fourth quarter of 2025 and $56 during 2026. 

"The supply picture is definitely improving, but also stronger demand continues to exceed expectations, which accounts for the volatile trading," agrees Dennis Kissler, senior vice president of trading at BOK Financial.

After a short-term spike in prices to almost $80 per barrel amid the conflict between Israel and Iran last month, the oil market returned to a calmer dynamic. During the conflict, Wall Street analysts considered worst-case scenarios in which the cost of oil could reach $120-130 per barrel. However, their baseline scenarios still assumed a decline by the end of the year. The end of hostilities and the announced truce led to a reduction in the geopolitical risk premium, writes Yahoo Finance.

September Brent crude futures nonetheless jumped 2 percent on Monday - after reports of a production ramp-up - to close at $69.6 a barrel. Investors are counting on stronger global demand to offset the increase in supply, explainsReuters. Prices are in slight plus territory in trading on July 8.

Since the beginning of the year, Brent crude has fallen by 4.4% and US WTI by almost 3%.

Lower energy prices could cut profits at US energy major Exxon Mobil by $0.8-1.2 billion, it warned ahead of its second-quarter report in early August. Exxon shares fell 0.4% on the premarket in New York, while Chevron securities lost about the same amount. 

While investors were well aware of the significant drop in oil prices, the warning itself was unexpectedly harsh and raised questions about the financial performance of the entire industry, Barron's points out. And recalls that it followed a similar announcement by Britain's Shell that its trading profits would be lower than expected.

This article was AI-translated and verified by a human editor