BMI, a Fitch Solutions company, has kept its forecast for Brent crude oil at US$81 per barrel for 2024, with a slight decline to US$78 per barrel in 2025.

The company stated that three major factors will determine oil price movements over the coming year: OPEC+ policy, the US presidential election outcome, and tensions in the Middle East. Oil prices have faced significant downward pressure in recent months, dropping from over US$87 per barrel in Q3 2024 to under US$72 per barrel. BMI argued that this decline was not based on fundamental factors.

"Our data suggest that the market has remained relatively balanced, with high-frequency indicators supporting this view. The price drop, however, appears to be driven by speculative trading, with market participants pricing in an expected supply glut next year," BMI noted in its statement.

OPEC+ policy, in particular, is expected to be the dominant influence on oil prices in the year ahead. The group is scheduled to begin returning some of the cut barrels to the market in January 2025. BMI's forecast aligns with this, anticipating that OPEC+ will extend its cuts into the new year to support prices. Any further extensions of these cuts will be key in mitigating the expected oversupply in the market, BMI added.

However, there are risks to this outlook, with the possibility that OPEC+ may decide to prolong the extensions into the second half of 2025 or deepen its cuts, depending on market conditions. "This is unlikely unless prices remain weak, so the upside risk to our current forecast for Brent is limited," BMI stated.

The company also discussed the potential impact of the US presidential election, specifically the prospect of Donald Trump winning a second term. While BMI noted that Trump's victory would likely be supportive of the domestic oil and gas sector, especially through deregulation, it doesn't foresee a significant short-term change in US production growth.

BMI added that although Trump's election could shift the dynamics in the Middle East, there is still considerable uncertainty about how US involvement will evolve and what impact that will have on the region. BMI's core view is that the ongoing conflicts in Gaza and Lebanon are likely to end in the first half of 2025, and that achieving peace would likely become a priority for President-elect Trump. This, in turn, would remove the conflict-related risk premiums, diminishing some of the support for crude prices.