Despite the ongoing geopolitical risks in the Middle East, Wall Street is already feeling disappointed about the outlook for crude oil next year. With the increase in global oil supply, Goldman Sachs and Morgan Stanley have recently lowered their oil price forecasts.

These two banks currently project that the average price of Brent crude oil worldwide will be below $80 per barrel in 2025. Goldman Sachs has revised its forecast for the average price of Brent crude oil in 2025 to $77 per barrel, while Morgan Stanley expects it to be between $75 and $78 per barrel. At the same time, both companies expect a surplus in the global crude oil market, with oil prices trending downwards over the next 12 months.

Goldman Sachs: OPEC+'s shift will disrupt market balance.

On Monday, Goldman Sachs analyst Daan Struyven's team released a report stating that OPEC+ decision to reverse voluntary production cuts may mean that OPEC+'s goal is to "strategically constrain supply from non-OPEC countries."

Previously, OPEC+ has been willing to reduce oil production at the expense of market share in order to support oil prices. However, now OPEC+ may change its stance. Goldman Sachs predicts that OPEC+ will start phasing out additional voluntary production cuts in the fourth quarter of 2024.

Goldman Sachs points out that OPEC+'s previous production cut plans played a key role in maintaining balance in the crude oil market, and this shift in plans may disrupt the current short-term balance of the market, shifting towards a longer-term strategy that focuses on constraining supply from non-OPEC+ countries.

Goldman Sachs has lowered the price forecast range for Brent crude oil by $5 per barrel to $70-85, and has revised its average price forecast for Brent crude oil in 2025 to $77 per barrel, down from the previous forecast of $82 per barrel.

Goldman Sachs also warned that in many cases, crude oil prices may be lower than their revised forecasts.

As of the time of writing, Brent crude oil is hovering around $80.12 per barrel, with an average price of about $83 per barrel this year.

In recent months, due to investors' concerns about slowing oil demand growth, increasing non-OPEC+ supply, and OPEC+'s plan to relax production limits, oil prices have been continuously falling, and have already wiped out all the gains so far this year.

Morgan Stanley predicts: there may be an excess in the oil market next year.

Last week, Morgan Stanley analysts also wrote in a report that although the global crude oil market will remain tight throughout the third quarter, the fourth quarter is expected to see a stabilization and potential oversupply by 2025.

Due to the expected increase in crude oil supply and weak demand by 2025, the company has lowered its forecast for Brent crude oil prices in the fourth quarter of this year from $85 per barrel to $80 per barrel, and it is now expected that the price will gradually decline to $75 per barrel by the end of 2025, slightly lower than the previous estimate of $76 per barrel.

In addition to the shift in OPEC+'s production reduction plan, the weakening of China's demand is also an important factor affecting the oil market. Morgan Stanley emphasized several contributing factors, such as the surge in sales of liquefied natural gas (LNG) powered trucks and the increasing popularity of electric vehicles, which are reducing the demand for traditional fuel vehicles in China. Furthermore, the company points out that the slowdown in demand for petrochemical raw materials is another reason for the downward revision of demand growth expectations.