EnergyMarkets

Barclays Slashes Brent Crude Forecast as OPEC+ Accelerates Output Hikes

 In May 2025, OPEC+ surprised markets by accelerating oil output hikes, aiming to end voluntary production cuts by October. Barclays responded by lowering its Brent crude forecasts, citing risks of oversupply and weakening global demand.

Introduction: A Market Surprise from OPEC+

The global oil market is once again at a pivotal point. In early May 2025, the Organization of the Petroleum Exporting Countries and allies (OPEC+), surprised markets with its decision to accelerate crude oil output hikes, a move set to phase out voluntary production cuts by October 2025. In response, Barclays sharply revised its Brent crude oil price forecasts, citing potential oversupply and weakening demand as key reasons behind the downward revision.

Barclays Cuts Forecasts: A Sign of Things to Come

Barclays updated its outlook for Brent crude on May 5, 2025, trimming its price estimate for 2025 by $4 to $66 a barrel and reducing the 2026 projection by $2 to $60. This adjustment followed OPEC+’s decision to increase output by 411,000 barrels per day starting in June.
The British bank emphasized that the timing and pace of these hikes, coupled with faltering demand signals, are likely to suppress prices in the medium term.
Barclays’ previous estimates had already taken a cautious tone, with earlier reports in March revising the 2025 Brent forecast downward from $83 to $74 due to persistent global economic uncertainty.

OPEC+’s Strategy: A Double-Edged Sword

The decision by OPEC+ to bring more oil to market sooner than expected is widely seen as a gamble. While some member nations aim to recapture market share and support domestic fiscal needs, analysts argue this move risks flooding the market with supply just as global demand shows signs of fragility.
As reported by Reuters, OPEC+’s plan to reverse voluntary production cuts could undermine the stabilization efforts of the past year, which had kept prices within the $70–$85 per barrel range. This recent move led to a drop in Brent crude by more than $2, pushing it below $60 per barrel, its lowest point since early April.

Other Analysts Weigh In: Goldman, Morgan Stanley, HSBC React

Barclays is not alone in sounding the alarm. Goldman Sachs noted in March that OPEC+’s aggressive production targets may introduce downside risks to its Brent forecast, citing softer U.S. economic data, increased tariffs, and geopolitical volatility. Meanwhile, Morgan Stanley and HSBC also adjusted their supply outlooks in late 2024, forecasting Brent prices around $70 for 2025 as the market anticipated a smaller-than-expected supply deficit.
These revised forecasts reflect broader concern among financial institutions about the trajectory of both oil supply and macroeconomic demand, especially as central banks signal prolonged interest rate hikes and China’s economic recovery remains uneven.

Investor Sentiment and Market Reaction

The immediate market reaction has been stark. Following the OPEC+ announcement on May 4, oil prices saw a sharp decline, with Brent crude dropping more than 3% to $59.25 per barrel.
While a modest recovery was seen the following day—gaining just over 1% as bargain hunters entered the market—oversupply fears continue to weigh heavily on investor sentiment.
Traders are now recalibrating their positions, with options pricing showing increased hedging against further downside risks. Volatility in energy markets has also spilled over into equity markets, particularly affecting shares of oil majors and exploration companies.

Demand Uncertainty Looms Large

At the heart of these price movements lies a troubling concern: global oil demand remains uncertain. Weaker-than-expected industrial activity in the U.S., sluggish growth in Europe, and a tepid post-COVID recovery in major Asian economies have all contributed to a muted demand outlook.
Barclays’ report underscored this point, noting that despite low inventory levels, “the balance of risks is skewed to the downside”—meaning supply could overwhelm any moderate demand uptick in the near future.

Conclusion: A Delicate Equilibrium for the Oil Market

As OPEC+ forges ahead with its output plans and major banks adjust their outlooks, the oil market enters a new phase of rebalancing. For now, the consensus among analysts is clear: if supply increases outpace demand recovery, Brent crude may struggle to regain the highs seen in early 2024.
For energy policy makers and investors alike, the next few months will be critical. Whether demand can rebound enough to absorb increased production—or whether OPEC+ may have to rethink its strategy—remains to be seen.

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