Here’s How Oil Prices Could Rise – Wells Fargo by Investing.com

Investing.com – Crude oil prices have pulled back recently, but that is likely to change soon as U.S. oil production begins to decline, according to Wells Fargo.

After being positive for most of 2024, year-to-date crude oil yields have recently slipped into the negative. , the main global benchmark, is down 3.5%, and the main US benchmark (West Texas Intermediate, or WTI) is down 0.4% on the year.

Crude oil prices have given back this year’s gains on a combination of supply and demand-related reasons, analysts at Bank of America said in a Sept. 23 note.

“For starters, on the demand side, the global economy has softened slowly. On the supply side, markets have become concerned that the world’s two largest producers, OPEC+4 and the US, will accelerate production growth,” Wells Fargo said.

The U.S. bank understands supply and demand concerns, but suspects they are already factored into crude oil prices.

“While it is true that global demand for crude oil has been weak for much of 2024, the weakness does not appear to be accelerating. This is important because global liquidity has started to increase, as evidenced by central banks starting to cut interest rates,” Wells Fargo said.

Furthermore, from a supply-side perspective, both OPEC+ and the US are more likely to cut output than increase it with crude oil prices in the $60s and $70s per barrel, the bank added, with OPEC+ already saying so .

A few weeks ago, the group said it would not cancel planned production cuts that were scheduled to start in October 2024.

For the US, the bank believes production growth will soon slow as the average cost to open a new shale well is nearly $64 per barrel.

“The bottom line is that crude oil prices have been low in recent months, but we suspect they will strengthen soon – on the supply side, the world’s largest oil producers, OPEC+ and the US, have little incentive to increase output at current prices. ,” Wells Fargo said.