Oil's recent pullback is likely temporary, as an uptick in demand in the coming months will send prices higher, JPMorgan analysts say.
On Thursday, West Texas Intermediate (CL=F) futures rallied 2% to rise above $75 per barrel while Brent (BZ=F), the international benchmark price, increased almost 2% to trade just below $80 per barrel.
The rebound follows a sharp sell-off earlier this week after oil alliance OPEC+ announced it would keep most of its reductions in place into 2025 but start a gradual unwind of its voluntary cuts in October.
"Summer inventory draws should be enough to get Brent back into the high $80s-$90 range by September," Natasha Kaneva, JPMorgan's head of global commodities strategy, wrote in a note on Thursday.
The markets had anticipated the OPEC+ reductions to stay in place through the fourth quarter of this year.
Saudi Arabia's oil minister said price stability is still the oil alliance's goal and hinted that the phaseout of voluntary cuts later this year could be changed.
While adding barrels to the market would be bearish for prices, JPMorgan analysts pointed out that a number of key OPEC producers are already pumping well above their assigned quotas and demand growth remains healthy.
"We expect a seasonal uptick in demand to begin shortly and project demand for both products and crude to surge by 2.5 mbd [million barrels per day] and 4.0 mbd, respectively, between April and August," wrote Kaneva.
The analyst said additional demand could potentially come from Chinese buyers as the country takes advantage of lower prices to add to its strategic and commercial crude reserves.
Next year oil prices could head lower as supply outside of OPEC+ rises and demand slows, according to Kaneva and her team.
"Global oil demand growth will likely decelerate from 1.4 mbd this year to 1 mbd in 2025 as the last phase of the post-pandemic rebound dissipates and advancing energy efficiencies and an expanding electric vehicle fleet gain ground," said Kaneva.
"Our price outlook calls for Brent to average $75 in 2025, sharply down from $83 in 2024, with prices exiting the year at $64," she added.
Oil futures peaked in April as WTI closed above $86 per barrel while Brent surpassed $91 per barrel.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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