Oil prices fell sharply on Wednesday by more than $2 a barrel, after OPEC released its monthly report indicating that the oil market could see a balance between supply and demand by 2026 , a clear shift from its previous forecasts of a supply deficit.
Brent crude closed at $62.71 a barrel , down 3.76% , while U.S. West Texas Intermediate crude fell to $58.49 a barrel , a drop of 4.18% .
OPEC explained that the gradual increase in production from OPEC+ alliance countries will be sufficient to cover global demand over the next two years, which surprised markets that had been betting on a continued supply shortage.
Phil Flynn , senior analyst at Price Futures Group , said: “The OPEC report has changed the overall market mood. Expectations of balanced supply mean less pressure on prices in the short term.”
In contrast, the International Energy Agency (IEA) released its annual report indicating that demand for oil and gas may continue to grow until 2050 , in clear contradiction to previous forecasts that suggested peak demand would occur during this decade.
John Kilduff of Again Capital explained that “the report comes at a time when sellers are finding it difficult to offload oil shipments, reflecting weak actual demand in the spot market.”
Analysts also pointed out that the supply glut remains a significant factor limiting any sustained price rise, despite OPEC+ suspending planned production increases in the first quarter of next year.
On the other hand, experts believe that the reopening of the US government could boost consumer confidence and revive economic activity, which could support demand for crude oil in the coming weeks.
The U.S. Energy Information Administration (EIA) is expected to release its Energy Outlook report on Thursday, as markets await any new signals about the future of global demand.
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