HSBC Global Research sees Brent crude prices remaining rangebound at $75 per barrel to $85 per barrel in the medium term as analysts expect the spare capacity to offset any impact of geopolitical risks.
The “above average” spare production capacity held by the Organization of the Petroleum Exporting Countries (OPEC) and allies will dampen the impact of Red Sea disruption and rising geopolitical risks, HSBC analysts said in a note on Wednesday.
OPEC+’s spare production capacity of 4.5 million b/d at the end of 2024, which was up from 4.3 million b/d at the end of 2023, should help dampen price spikes, they said.
“Trade disruptions in the Red Sea add only a marginal premium to oil prices and no physical supplies have been lost so far.”
Additionally, OPEC+’s strategy to influence prices through regular production cuts has been challenged by higher non-OPEC output and slowing oil demand.
The growth in global oil demand is set to see a downshift due to higher electrification as more consumers opt for battery-powered vehicles.
HSBC analysts forecast oil demand growth of 1.3 per cent in 2024 over a year earlier, further slowing to 0.9 per cent in 2025.
Brent crude was trading around $79.51 a barrel at 1109 GMT on Wednesday, while U.S. West Texas Intermediate crude futures were at $74.41.