Plummeting oil prices expected due to excessive supply and lingering market uncertainty in demand forecasts

The global oil market is bracing for a potential downturn, as numerous analysts forecast Brent crude prices to slide to around $63 per barrel in the fourth quarter of 2025. This consensus view is shared by Vivek Dhar of Commonwealth Bank of Australia, as well as Goldman Sachs, Morgan Stanley, JPMorgan, and SEB Bank.

Analysts attribute this anticipated drop to a persistent oversupply and fading seasonal demand. The oversupply is being exacerbated by the fact that eight Opec+ producers are pursuing raised production targets, adding volumes just as global demand growth shows signs of slowing. Non-Opec producers, including US shale operators, are also continuing to add barrels at a pace that reinforces the glut narrative.

The oversupplied market, coupled with growth concerns in Europe and currency volatility in emerging markets, makes it unlikely for the demand side to absorb the extra supply meaningfully in the near term. This is particularly true given the inconsistent Chinese demand, a key swing factor over the past two years, as economic recovery slows.

Moreover, Opec+, including major producers such as Saudi Arabia, the UAE, and Russia, has accelerated output increases to protect market share. However, these increased supplies are being counterbalanced by higher-than-expected draws in US crude inventories, indicating resilient demand in the industrial and freight sectors despite the end of the summer driving season.

Despite these bearish sentiments, some analysts, such as Phil Flynn of Price Futures Group, suggest that demand pessimism may be overstated. He argues that while US inventories remain supportive in the short term, the balance of risks skews to the downside, with prices likely to remain capped due to Opec+ barrels coming to market and weak macroeconomic indicators.

As the market awaits next week's Opec+ meeting for signals on whether the group might recalibrate its production strategy, geopolitical flashpoints, such as Ukrainian attacks on Russian oil export terminals, are being closely monitored by traders. However, any potential supply disruptions have been eased by reports of possible ceasefire talks.

In the meantime, WTI, the US benchmark, is expected to average $64.65 per barrel this year, broadly unchanged from July estimates. For Q4 2025, WTI is projected to be just above $60.30, according to a Wall Street Journal survey. Brent, on the other hand, is forecast to average $67.65 per barrel this year, slightly below the previous month's projection.

Amidst these forecasts, one factor remains constant: the world's third-largest importer, India, has thus far defied Washington's calls to stop purchasing Russian oil, adding to global supply chain unpredictability. US trade and tariff policies are causing uncertainty about demand expectations, with President Donald Trump's decision to double tariffs on Indian imports to 50% heightening fears of weaker trade flows and reduced oil demand.

In conclusion, the global oil market is expected to weaken further into the final quarter of 2025 and the early part of 2026, as increased supply outpaces demand. Market participants will be closely watching next week's Opec+ meeting for any indications of a production strategy recalibration, as prolonged price weakness could eventually test the cohesion of its members.

Plummeting oil prices expected due to excessive supply and lingering market uncertainty in demand forecasts