Recently, crude oil has been undergoing a "brutal" sell-off. WTI crude oil futures plummeted 8% last week, marking the largest single-week drop in 11 months, and closed at $67.67 a barrel on Friday, continuing to set a new low for over a year. The Brent crude oil trend is equally grim, with a cumulative decline of nearly 10% last week.

At present, Wall Street institutions remain unanimously pessimistic about crude oil expectations. On September 9th, Morgan Stanley once again downgraded its oil price forecast, believing that the global oil market is in a period of weak demand. Citigroup is even more bold in predicting that due to market oversupply, oil prices could fall to around $60 a barrel by 2025.

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In line with the views of Wall Street investment banks, Goldman Sachs also believes that future oversupply of crude oil will be an important factor driving the continued weakness of oil prices. Although HSBC maintained its oil price forecast in the latest research report, it stated that it is hard to be bullish on the crude oil market, and the downside risks to oil prices are increasing.

The commodity giant Trafigura Group, which has long been bullish on crude oil, also rarely agrees with the "oversupply" view, warning that oil prices could fall to $60.

With a unanimous pessimistic expectation from Wall Street investment banks, is the oil price heading straight for $60?

On September 9th, concerned about oversupply and weak demand, Morgan Stanley lowered its Brent crude oil price forecast for the second time in a few weeks. Analysts including Martijn Rats, in their report, reduced the forecast for Brent crude oil at $80 a barrel in the fourth quarter of this year to $75 a barrel. The 2015 price forecast was also lowered to $75 a barrel.

Morgan Stanley stated that the increase in crude oil inventories and the decline in refining profits all reflect characteristics of periods of recession or weak demand. These periods include the decline in crude oil demand caused by the financial crisis from 2007 to 2008 and the pandemic crisis in 2020. The bank pointed out that there will be an oversupply of about 1 million barrels/day in the crude oil market by 2025:

The seasonal trend of strengthening crude oil demand usually subsides after the summer, entering the fourth quarter, and the supply of crude oil from OPEC and non-OPEC countries may accelerate again, leading to a shift in the supply-demand balance. The crude oil market will remain in a tight balance in the third quarter, close to balance in the fourth quarter, and there will be an oversupply of about 1 million barrels/day in the crude oil market by 2025.

Taking into account high idle capacity, potential trade tensions, and the possibility of OPEC supply exceeding expectations next year, Goldman Sachs lowered the Brent crude oil price forecast range by $5 a barrel to $70-85 last month. Currently, Goldman Sachs still maintains this expectation.

Compared with Goldman Sachs and Morgan Stanley, Citigroup's expectations are even more pessimistic. Citigroup's research strategists stated that by 2025, as the market experiences oversupply, oil prices could fall to around $60 a barrel. The report states:It is advised to sell when Brent crude oil prices rebound to around $80, as we anticipate that by 2025, with a significant supply glut emerging in the market, prices will drop to the $60 range. However, Citigroup forecasts that the postponement of production increases by OPEC+, along with geopolitical factors including supply disruptions in Libya, may provide support for Brent crude prices at $70-72.

Another investment bank, HSBC, maintains its expectation for Brent crude at $80 per barrel for the fourth quarter of this year, with a 2025 price forecast of $76.5 per barrel. However, the bank states that it is hard to be bullish on the oil market. Moreover, considering the expected supply glut at the beginning of next year, the downside risk to oil prices is increasing. If the supply glut occurs earlier than expected, the risk of prices falling below the $75-85 per barrel range will increase.

HSBC anticipates that oil prices may fluctuate due to OPEC+'s decisions. An increase in production could lead to a market surplus and a drop in oil prices, while a delay in production increases might support prices in the short term. The bank stated:

OPEC+ faces a tough choice: either to increase production and risk a supply glut, or to maintain production levels, which could be seen as an admission of weak crude oil demand, thereby affecting market sentiment.

Today (September 10th), OPEC will release its monthly oil market report.

Trafigura, a rare warning of a significant oil price drop, but also advises against excessive pessimism.

On the first day of the Asia-Pacific Petroleum Conference (APPEC), two major commodity trading giants, Trafigura and Gunvor Group, also conveyed a pessimistic outlook for the crude oil market.

Trafigura, a long-term bull on crude oil, rarely agrees with the "supply glut" view, anticipating a significant drop in oil prices. The head of oil trading at Trafigura, Luckock, stated that Brent crude prices "could soon enter the pessimistic range of $60."

However, Luckock also cautions against being overly bearish on the oil market. He said, "It's dangerous because there are too many events that could change the situation, and one should not put all their chips on the bearish side."The chairman of Gunvor Group stated, "Currently, the amount of oil we produce far exceeds the consumption, and this imbalance is expected to worsen in the coming years."

How long can OPEC+'s agreement to suspend production increases support oil prices?

Last Thursday, according to Reuters citing a representative, OPEC+ has reached a consensus to postpone the plan to increase oil supply by two months. In response, Morgan Stanley indicated that OPEC+'s delay in the production increase plan shows that it still focuses on the balance of the oil market. Unless demand further weakens, it is expected that Brent crude oil prices may remain stable around $70.

Goldman Sachs said in its latest research report that although OPEC+ agreed to delay the production increase plan by two months to the end of November, it still expects OPEC+ countries to increase production for three months afterwards. The bank estimates that by 2025, the entire crude oil market may shift from a slightly tight supply-demand balance to a potential surplus.

Market analysis points out that despite the sharp drop in US crude oil inventories, the risk of oil tanks bottoming out in Cushing, and OPEC+'s decision to postpone production increases by two months, the rebound in oil prices is weak because bears now dominate.