As the world’s petroleum producers increase the global supply of oil, one market watcher says resilient demand for crude could push prices higher than traders expect in the second half of this year.
The Organization of Petroleum Exporting Countries (OPEC) is reportedly going ahead with planned production increases next month, though the cartel is also considering a pause in subsequent supply hikes due to fears of an oversupplied global market.
As OPEC weighs its options, the focus of experts like Rebecca Babin, senior energy trader at CIBC Private Wealth, is on demand, which is typically lower in the fall months compared to the summer.
“The wildcard here is what happens with demand,” Babin told BNN Bloomberg in an interview Thursday afternoon.
“We know that supply is likely coming and we’re seeing it, it’s on the horizon, we’re pricing it, we’re putting it down in our models, but does demand, which actually has been really resilient for the first half of the year kind of really take that downward slope that I think many analysts are penciling in?”
Babin said there could be an “upside surprise” to oil prices in the coming months if demand remains stronger than anticipated. “I just don’t think that’s on anyone’s radar,” she said.
Seasonal demand changes are particularly important to note in the Middle East, Babin explained, where localized oil demand has been “very high” in recent months due to the need for cooling systems powered by crude.
“As that subsides, more of those barrels that they have on their quota will be hitting the market,” she said, referring to Middle East oil giants like Saudi Arabia.
OPEC’s three previous monthly production increases have not had a meaningful impact on crude prices this year so far, said Babin, however if August’s supply hike goes ahead as planned, prices could move significantly lower by September.
Babin said that when she looks at the downside for oil prices in the second half of 2025, she sees crude falling as low as the high-US$50s or low $60s as markets absorb the increased supply.
“But I don’t see this massive pullback to the low $50s because the positioning in this is so well telegraphed that I think the market is somewhat set up and ready for it,” she said.
West Texas Intermediate fell on Thursday to under $67 a barrel, while Brent crude was also lower, hovering below $69.
