Oil: With less focus on geopolitical risk, prices will fall — Julius Baer

The focus of the oil markets seems to have shifted away from geopolitical context, indicating looser rather than restrictive supply and demand fundamentals in the future. This is the assessment of Julius Baer, which released a note to clients and the market on Friday, reinforcing the view of a drop in the energy commodity's price amid robust supply in North America, which would pressure prices to around $70 still this year.

“We maintain our cautious view. The optimistic mood is expected to cool, and the geopolitical risk premium is likely to disappear,” warns Norbert Ruecker, Head of Economics and Next Generation Research at Julius Baer.

Julius Baer points out that recently released data indicate a “surprising increase in oil supply” in the United States, while in Canada, a pipeline service comes into operation, providing a direct export hub to Asia, and next year, the first major liquefied natural gas terminal is expected to accelerate operations.

“Both projects aim to reshape the energy market and sustain the country's status as a powerhouse in commodities,” Ruecker concludes.

On the other hand, demand is expected to remain stagnant, with a still tight labor market in the United States and economic challenges in China. In the Americas, production growth appears sufficient to offset the expansion of consumption in emerging economies, according to the expert.

Want to invest in oil sector companies but don't know which one to choose? Today is your lucky day! In addition to prices up to 40% OFF, we will give readers of this InvestingPro article an ADDITIONAL DISCOUNT. Just use the discount code INVESTIR when signing up for our Pro or Pro+ plans for 1 or 2 years. Click here and apply your promotion now!