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Uncertainty in geopolitics remains high, the price of gold is back above the $3,300 mark, and yet oil starts the week in the red. This is mainly due to two reasons. First, the U.S. economy contracted by 0.3% for the first time since 2022, while analysts were expecting a 0.4% increase. Second, OPEC+ has decided to accelerate oil production.
There is no real reason to panic on the first point, at least for now. The weaker GDP numbers are primarily due to a widening trade imbalance: anticipating higher tariffs from Trump, companies have rushed to stock up on imports. At the same time, consumer confidence is worsening, which could slow the economy further.
As for OPEC+, the cartel’s recent decision could return up to 2.2 million barrels daily to the market in November. Expectations of a global economic rebound do not drive this move, but by Saudi Arabia’s desire to punish some members for exceeding their production quotas, a tactic it has used effectively in the past.
Will oil prices continue to fall?
Given the growing risks of a global economic slowdown (the IMF has lowered its global growth forecast for 2025 by 0.5% to 2.8%), exacerbated mainly by trade wars, oil demand could remain weak. This means that oil prices could remain under pressure. Some analysts are even predicting a drop below $50 per barrel.
However, it should be noted that Saudi Arabia’s budget assumes oil prices around $90 per barrel. A prolonged drop could also hurt the U.S.: shale production becomes unprofitable at such low levels, leading to a slowdown in production. In short, it is in no one’s interest for prices to remain low, which may limit their fall.
One possible source of support for oil prices could come if Trump imposes secondary sanctions on Tehran’s oil buyers. The Venezuelan precedent shows that such measures can work. In addition, some U.S. senators are proposing similar sanctions against Russia. If these threats become reality, the global oil supply would tighten.
