S&P Global predicts oil to be cheaper than $50. Analysts talk about a price war

Excessive supply from OPEC+ on the background of weak demand threatens to collapse oil prices below $50 per barrel already this year. This forecast was made by the analytical company S&P Global Commodity Insights. Bank of America says that the OPEC+ production increase is part of Saudi Arabia's strategy, which is engaged in a long-term price war for market share;

On June 9, S&P Global Commodity Insights lowered its average forecast for the price of Brent this year from $72 to $63, writes Barron's. Analysts estimate that at some point the price could also fall into the $40-49 range. American oil WTI, which traditionally trades cheaper than Brent, may also find itself in this corridor, they believe.

The agency's forecast came after the best week for oil since the beginning of the year, with WTI and Brent up 6% to $64.6 and $66.5 per barrel, respectively. Prices are supported by relatively stable demand, Barron's notes. But it is not worth counting on the continuation of the rally, warns the head of global research on crude oil in S&P Global Jim Burkhardt. According to him, OPEC+ is actively increasing production at the very moment when demand growth starts to slow down.

Berkhard estimates that in the second half of 2025, global oil production will grow by 2.2 million barrels per day, while demand will increase by only 390,000 barrels. This year could be the weakest in terms of demand growth since 2001, barring a pandemic and the financial crisis.

«Right now, oil prices have no defense,» S&P Global said in a note. According to Burkhardt, the summer road-travel season may support prices for a while, but then an oversupply of oil will pour into the market unless there is a change of course in production.

Falling oil prices will force US oil producers to slow down drilling, primarily of shale oil, which has a high production cost. According to the forecast of S&P Global, by the end of 2026 oil production in the U.S. may be lower by 640 thousand barrels per day compared to the middle of 2025. This would be the first such decline in a decade, Barron's notes. According to the latest data from oilfield services company Baker Hughes, the number of active drilling rigs in the U.S. has already fallen to its lowest level in almost four years.

Among other things, thanks to this, Saudi Arabia will be able to regain its share of the world market, said Francisco Blanche, head of commodity market research at Bank of America. He recalled that OPEC+, which is actually headed by Saudi Arabia, last month announced the third increase in production - by more than 400 thousand barrels per day, which exceeded the previously planned volumes. Thus, the alliance is gradually rolling back years of supply restrictions that kept prices high.

«This is not the kind of price war that will be abrupt and short-term. Rather, it's going to be a long and gradual price war,» announced Blanch in an interview with Bloomberg.

In addition, Riyadh, according to a Bank of America analyst, also intends to wrest market share from other OPEC+ member countries. 

«The Saudis single-handedly supported prices for more than three years, allowing competitors to ramp up production. Now they are done with it,» the analyst states.