Oil prices drop on forecast surplus supply in 2025, but are set to rise by a weekly gain

Oil prices fell on Friday, as investors shifted their focus to a forecast for ample supply. They also shrugged off the expectation of higher demand in 2013 due to Chinese stimulus measures. Meanwhile, they were watching a Federal Reserve rate cut scheduled next week.

Brent crude futures were down 8 cents at $73.33 per barrel as of 0125 GMT, while U.S. West Texas intermediate crude was down 7 cents at $69.95 per barrel.

The International Energy Agency (IEA) expects non-OPEC+ countries to increase their supply by approximately 1.5 million barrels per daily (bpd), led by the United States of America, Canada, Guyana and Brazil.

In its monthly report on the oil market, the IEA raised its forecast for demand from 990,000. The IEA said that the growth in demand would occur "primarily in Asian countries as a result of China's recent stimuli measures".

Warren Patterson, ING’s head of commodities analysis, stated: "I think with an outlook of a relatively comfortable balance, there is little reason for prices to break out of the range at this time."

Three of Canada's largest oil producers predict higher production by 2025. Goldman Sachs predicts that Lower 48 shale production will grow by 600,000. bpd, building on the record production of the U.S.

Brent and WTI prices are still on track for a weekly increase of more than 3 percent, as fears about disruptions in supply due to tighter sanctions against Russia and Iran and the hope that Chinese stimulus measures will boost demand in the world's second largest oil consumer. Prices are supported by the world's No. 2 oil consumer.

In November, Chinese crude imports increased annually for the first seven-month period due to lower prices and stockpiling.

Patterson, of ING, said: "We've seen a slight recovery in refinery profit margins from the September lows. But I don't believe it's enough to justify the crude import volumes for November."

The world's biggest importer of crude oil is expected to continue to import more until early 2025, as refiners, attracted by lower prices, opt to buy more from the top exporter, Saudi Arabia. Meanwhile, independent refiners rush their quota.

Investors are also watching the impact of sanctions against Russia and Iran, on the supply from major oil producers in China and India.

The Fed is also expected to cut borrowing rates next week, and then further reduce them next year after the economic data showed that weekly unemployment insurance claims unexpectedly increased. Reporting by Florence Tan, Editing by Muralikumar Anantharaman

(source: Reuters)