Sell ​​Crude Oil Downside Risks: UBS By Investing.com

Investing.com — UBS remains bullish on oil prices, suggesting in a note on Thursday that investors should focus on downside risks as supply remains tight.

According to the company’s latest note, oil supply growth was modest, keeping the market in the deficit despite concerns about slowing economic growth.

“Global oil production rose by just 320,000 barrels per day (bpd), or 0.3%, to 103.45mbpd between December 2023 and July 2024,” UBS analysts said.

The bank said non-OPEC+ countries contributed 270,000 bpd to the increase, while OPEC+ added just 50,000 bpd. Brazil’s output was also weaker than expected and estimates of supply growth for the year were downgraded significantly, they added.

UBS also notes that US crude oil production has slowed. “Production in North Dakota, home to the Bakken shale field, fell for four straight months through July,” the note said.

Meanwhile, Gulf of Mexico output is also expected to fall by 150,000 bpd in September due to recent hurricanes.

Although the Permian Basin remains the main source of U.S. crude oil growth, overall production has slowed, reflecting a natural decline after aggressive drilling in 2023, UBS says.

Looking ahead, the bank expects US crude output to remain low in 2025 due to low oil prices and uncertainty over OPEC+ supply.

Despite these challenges, the investment bank believes that efficiency gains and lower inflationary pressures should help support some growth.

UBS concludes that, given that oil stocks will continue to fall, prices are expected to rise above $80 per barrel. “We continue to recommend risk-seeking investors sell downside risks to crude oil prices,” advises UBS, maintaining a positive price outlook for next year.