Oil could plunge to in 2025 if OPEC unwinds voluntary production cuts, analysts say

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Oil could plunge to $40 in 2025 if OPEC unwinds voluntary production cuts, analysts say

Published

2 days ago

November 13, 2024

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A pump jack in Midland, Texas, US, on Thursday, Oct. 3, 2024.

Anthony Prieto | Bloomberg | Getty Images

Oil prices may see a drastic fall in the event that oil alliance OPEC+ unwinds its existing output cuts, said market watchers who are predicting a bearish year ahead for crude.

“There is more fear about 2025’s oil prices than there has been since years — any year I can remember, since the Arab Spring,” said Tom Kloza, global head of energy analysis at OPIS, an oil price reporting agency.

“You could get down to $30 or $40 a barrel if OPEC unwound and didn’t have any kind of real agreement to rein in production. They’ve seen their market share really dwindle through the years,” Kloza added.

A decline to $40 a barrel would mean around a 40% erasure of current crude prices. Global benchmark Brent is currently trading at $72 a barrel, while U.S. West Texas Intermediate futures are around $68 per barrel.

Oil prices year-to-date

Given that oil demand growth next year probably won’t be much more than 1 million barrels a day, a full unwinding of OPEC+ supply cuts in 2025 would “undoubtedly see a very steep slide in crude prices, possibly toward $40 a barrel,” Henning Gloystein, head of energy, climate and resources at Eurasia Group, told CNBC.

Similarly, MST Marquee’s senior energy analyst Saul Kavonic posited that should OPEC+ unwind cuts without regard to demand, it would “effectively amount to a price war over market share that could send oil to lows not seen since Covid.”

However, the alliance is more likely to opt for a gradual unwinding early next year, compared to a full scale and immediate one, the analysts said.

Should the producers group proceed with their production plan, the market surplus could nearly double.

Martoccia Francesco

Energy strategist at Citi

The oil cartel has been exercising discipline in maintaining its voluntary output cuts, to the point of extending them.

In September, OPEC+ postponed plans to begin gradually rolling back on the 2.2 million barrels per day of voluntary cuts by two months in an effort to stem the slide of oil prices. The 2.2 million bpd cut, which was implemented over the second and third quarters, had been due to expire at the end of September.

At the start of this month, the oil cartel again decided to delay the planned oil output increase by another month to the end of December.

Oil prices have been weighed by a sluggish post-Covid recovery in demand from China, the world’s second-largest economy and leading crude oil importer. In its monthly report released Tuesday, OPEC lowered its 2025 global oil demand growth forecast from 1.6 million barrels per day to 1.5 million barrels per day.

The pressured prices were also conflagrated by a perceivably oversupplied market, especially as key oil producers outside the OPEC alliance like the U.S., Canada, Guyana and Brazil are also planning to add supply, Gloystein highlighted.

Bearish year ahead for oil

The market consensus is that there’ll be a “substantial” oil stock build next year, said Citibank energy strategist Martoccia Francesco.

“Should the producers group proceed with their production plan, the market surplus could nearly double… reaching as much as 1.6 million barrels per day,” said Francesco.

Even if OPEC+ doesn’t unwind the cuts, the future ofl prices is still looking break. Citi analysts expect Brent price to average $60 per barrel next year.

Further fueling the bearish outlook is the incoming administration of U.S. President-elect Donald Trump, whose return is associated by some with a potential trade war, said analysts who spoke to CNBC.

“If we do get a trade war — and a lot of economists think that a trade war is possible, and particularly against China — we could see much, much lower prices,” said OPIS’ Kloza.

Trump has also touted a “drill baby drill” policy for U.S. producers, vowing to cut energy prices in half.

For that to happen to retail gasoline prices, oil would need to drop to “below $40” per barrel, said Matt Smith, Kpler’s lead oil analyst.

Right now, retail gasoline prices are at a “sweet spot” at $3 per gallon, where consumers do not feel the pinch and input prices are still sufficiently high for producers, Smith added.

Environment

Beta Technologies founder completes first test flight in its production-intent eCTOL [Video]

Published

4 hours ago

November 14, 2024

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Beta Technologies founder completes first test flight in its production-intent eCTOL [Video]

All-electric aircraft developer BETA Technologies has shared another important milestone in bringing its first two vessels to market. Most recently, BETA’s founder, CEO, and test pilot Kyle Clark took the production version of its ALIA eCTOL up for its first flight, as seen in the video below.

BETA Technologies is a fully integrated electric aircraft and systems developer based in Vermont. Three years ago, it debuted its first electric vertical takeoff and landing (eVTOL) aircraft, the ALIA–250. That BETA vessel has since been renamed the ALIA VTOL and completed a piloted test flight transitioning mid-air this past April.

In addition to the ALIA VTOL, BETA has also been developing an electric conventional takeoff and landing (eCTOL) plane called the ALIA CTOL. To date, it has flown tens of thousands of test miles en route to evaluation flights for FAA certification. That aircraft is targeting full approval for commercial operations by 2025.

As BETA moves closer to bringing the ALIA CTOL to the public, it has completed its first bonafide production build in South Burlington. Following a Special Airworthiness Certificate from the Federal Aviation Administration (FAA), BETA has successfully taken its production-ready ALIA CTOL up for a test flight, piloted by its founder and CEO.

Watch BETA’s founder complete a CTOL test flight

BETA Technologies shared details of its first successful production CTOL test flight today alongside the images above and the full video below.

Once the production-intent build of the ALIA CTOL was complete, the FAA inspected the aircraft for safety and compliance before granting BETA a Multipurpose Special Airworthiness Certificate for Experimental Research & Development, Market Survey, and Crew Training, signing-off approval for test flights.

On November 13, BETA CEO, founder, and test pilot Kyle Clark conducted the first test flight of the ALIA CTOL aircraft, which lasted nearly an hour. The test included a conventional runway takeoff before the aircraft climbed to 7,000 feet.

While in the air, Clark tested the aircraft’s handling qualities, stability, control test points, and initial airspeed expansion before completing several approaches ahead of a normal landing. Clark spoke following the successful flight:

This start of our production CX300 flight test campaign is a result of years of hard work and focus on studying customer requirements, hard engineering, manufacturing, production, quality and test. It represents a significant milestone for BETA, and is the beginning of an exciting new phase for the business. With this, we’re one step closer to putting this technology into the hands of our customers.

We learned a lot from this first production build. We weren’t just building an aircraft company, we were building and refining a system to build high quality aircraft efficiently. This first build allowed the team to collect data and insight on manufacturing labor, tooling design, processes, yields and sequences, all of which are being used to refine our production systems.

With its production test flight campaign now underway, BETA says it will continue testing the ALIA CTOL aircraft for the standard 50 hours required before qualifying for a Market Survey and Crew Training certificate. That next certificate will enable BETA to fly outside of Burlington and Plattsburgh and continue training additional pilots on the aircraft.

The company shared it will also continue production of additional aircraft, including ALIA CTOL and ALIA VTOL configurations, the latter of which was recently teased in October. You can view footage of BETA’s CTOL flight below.

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Environment

U.S. crude oil rises, trades around $69 per barrel

Published

4 hours ago

November 14, 2024

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U.S. crude oil rises, trades around per barrel

Crude oil futures rose slightly on Thursday, with the U.S. benchmark trading around $69 per barrel, though the market outlook remains bearish.

Global crude supplies are expected to outstrip demand by more than 1 million barrels per day next year led by robust growth in the U.S., according to the International Energy Agency’s monthly market report.

Here are today’s energy prices by 8:07 a.m. ET:

West Texas Intermediate December contract: $68.92 per barrel, up 49 cents, or 0.7%. Year to date, U.S. crude oil is down more than 3%.
Brent January contract: $72.78 per barrel, up 50 cents, or 0.7%. Year to date, the global benchmark is down more than 5%.
RBOB Gasoline December contract: $1.9711 per gallon, up 0.3%. Year to date, gasoline has fallen nearly 6%.
Natural Gas December contract: $2.966 per thousand cubic feet, down 0.6%. Year to date, gas has gained nearly 18%.

UBS slashed its price forecast for global benchmark Brent to $80 per barrel from $87 previously on weakening demand in China, the world’s largest crude importer.

OPEC on Tuesday cut its demand growth forecast for the fourth month in a row earlier this week.

U.S. crude oil has shed about 4% and Brent is down 3.5% since Donald Trump won the U.S. presidential as the dollar has surged. A stronger U.S. dollar can depress oil demand among buyers that hold other currencies.

Don’t miss these energy insights from CNBC PRO:

Environment

Loren McDonald stops by Quick Charge to discuss EV charging, Paren, and more

Published

15 hours ago

November 14, 2024

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Loren McDonald stops by Quick Charge to discuss EV charging, Paren, and more

Leading electric vehicle analyst, author, and industry thought leaders Loren McDonald and Bill Ferro stop by Quick Charge to discuss EV Adoption’s acquisition by Paren, the “crisis” of EV charging reliability, and the real state of the EV market.

Depending on who you listen, EVs are either driving brands to record growth and are about cross that critical 10% of the overall market nationwide, or the future is bleak, the market is down, and EVs just aren’t selling. What’s really going on? Loren and Bill (probably) have some answers.

Today’s episode is sponsored by BLUETTI, a leading provider of portable power stations, solar generators, and energy storage systems. For a limited time, save up to 52% during BLUETTI’s exclusive Black Friday sale, now through November 28, and be sure to use promo code BLUETTI5OFF for 5% off all power stations site wide. Click here to learn more.

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