Iman Nasseri, MD-Middle East Research, FGE NexantECA said, “Going into next year, we have our price forecast sitting between $75 to $85 with $80 on an average,” Nasseri said.
Crude oil prices could ease next year as supply from non-OPEC producers rises, although the outlook remains highly dependent on developments in the Middle East and flows through the Strait of Hormuz.
The forecast takes into account the expected increase in crude supply from outside OPEC. Production from Latin America is expected to rise, with Guyana, Brazil and Venezuela together adding around 700,000-800,000 barrels per day year-on-year next year.
Nasseri said the oil market has been driven largely by geopolitical headlines in recent months rather than a major shift in fundamentals. Physical crude prices, however, remain elevated, with different grades trading in the $110-$130 per barrel range depending on the crude type and loading point.
He said price swings are currently being driven by changing expectations around the Strait of Hormuz, the Iran-US situation and supply disruptions. The market could therefore remain volatile until these developments translate into actual changes in physical supply.
While the crude outlook is softer, the diesel market is expected to remain tight through 2027.
Nasseri pointed to several factors that could keep diesel supplies constrained. Middle Eastern supplies of winter-grade diesel to Europe could be affected, with as much as 1 million tonnes per month currently at risk.Russian refining capacity is also under pressure, with around 1.6 million barrels per day of capacity offline following drone attacks. Lower refinery runs in China could further reduce the availability of diesel for Asian markets.
In addition, any restrictions on US diesel exports could further tighten supplies in Europe.
“2027 will continue to be a tight market for diesel, not at the elevation that we have observed in third quarter this year and we expect quarter four, but it is going to be historically on the high range for diesel cracks,” Nasseri said.
Overall, FGE NexantECA expects crude prices to moderate next year, while diesel cracks are likely to remain historically elevated as supply remains constrained.
For the entire discussion, watch the accompanying video
