Capital Economics expects oil prices to fall markedly over the next two years as OPEC+ presses ahead with its plan to unwind voluntary output cuts.
The macroeconomic firm sees Brent crude dropping to $60 per barrel by the end of 2025 and further to $50 by the end of 2026, both below consensus expectations.
“OPEC+ seems to be cautiously optimistic on the strength of the oil market as it remains committed to unwinding voluntary output cuts,” said Hamad Hussain, climate and commodities economist at Capital Economics, in a note.
“However, we suspect it will become increasingly clear that the oil market cannot fully absorb additional supply at current prices,” he added.
Producers already agreed to fully roll back the first tranche of 2.2 million barrels per day of curbs and will add another 137,000 bpd to supply in October as part of a second phase.
Brent is currently trading around $66.5 after recovering from last week’s dip, helped by the modest size of the increase.
OPEC+ has justified its decision with evidence of tight inventories and resilient prices, which have held in a $65–$70 range even as supply ramped up during the summer. The backdrop of potential tougher sanctions on Russian exports has also supported sentiment.
Still, Hussain argues that “the cracks in the market that we have been warning about are still present.”
China’s demand outlook is a key concern. The economist flagged that crude stockpiles in the country rose by about 1.5 million bpd between March and July, with structural headwinds such as slowing activity and electric vehicle adoption limiting future demand growth.
Seasonal demand that boosted the market in the third quarter is also set to fade.
For Saudi Arabia, the shift to boosting production may also be driven by fiscal needs. Hussain pointed out that Riyadh bore the brunt of previous cuts, which eroded its revenues as prices softened. Pumping more oil could partially offset the loss from weaker prices.
At the same time, he said there is uncertainty over the true extent of spare capacity across the group, particularly in Russia, where underinvestment may have reduced output potential.
Looking forward, Hussain expects OPEC+ to continue raising output gradually rather than aggressively. It has factored in several additional hikes through the rest of this year.
While these increases will put downward pressure on prices, the economist sees the broader market dynamic as more decisive, forecasting “a large surplus in Q4 2025.”
Against this backdrop, Capital Economics is sticking to its bearish outlook. It expects Brent to retreat to $60 by the end of next year and to fall further into the $50s by the end of 2026.
Source :
https://www.investing.com/news/economy-news/capital-economics-sees-oil-prices-falling-to-50s-by-end-of-2026-4230848
