Wells Fargo Predicts Reversal in Crude Oil Prices as US Production Slows
In a recent note, Wells Fargo analysts have pointed out that crude oil prices have taken a hit in 2024, slipping into negative territory after showing positive returns earlier in the year. Brent crude is down 3.5% while West Texas Intermediate (WTI) is lower by 0.4% year-to-date.
The decline in crude oil prices can be attributed to a combination of demand and supply factors, according to the US bank. The global economy has been softening slowly on the demand side, while concerns about production growth from major oil producers like OPEC+ and the US have weighed on the market sentiment.
However, Wells Fargo believes that these fears are already priced into the market. They argue that global crude oil demand has not been accelerating significantly, and with central banks cutting interest rates and global liquidity picking up, there could be a turnaround in prices soon.
On the supply side, both OPEC+ and the US are more likely to reduce production rather than increase it, especially with crude oil prices hovering around the $60s and $70s per barrel. OPEC+ has already committed to maintaining planned production cuts, while the US shale industry is expected to see a slowdown in production growth due to rising costs.
In conclusion, Wells Fargo predicts that crude oil prices will rebound in the near future as major producers have little incentive to ramp up production at current price levels. This analysis suggests that investors should keep an eye on the oil market for potential opportunities as the situation evolves.
