Oil Market Faces 2 Million Barrel-per-Day Surplus, BofA's Blanch Says

Geopolitical Influence - Geopolitics is currently the main driving force affecting oil prices, pushing them towards the high end of this year's range, with expectations of a price reversion to around $60 per barrel on Brent if a peace deal with Iran is reached or if limited skirmishes occur [1] Market Supply and Demand - The oil market is oversupplied, with rising inventories and an expected surplus of approximately 2 million barrels per day in the global Brent market this year [2][3] - OPEC has additional time to decide on production adjustments, but there is a significant amount of oil available in the market, and the price war initiated by OPEC to recover market share is not yet fully resolved [3] OPEC's Strategy - If oil prices exceed $70 per barrel and remain there, OPEC is likely to be incentivized to bring spare capacity back to the market [4] - OPEC is expected to increase oil production to recover market share, with a meaningful decline in super productive capacity anticipated over the next one to two years [5][7] U.S. Production Impact - Between 2022 and 2024, U.S. crude oil output increased by an additional 3 million barrels per day, which OPEC+ aims to avoid repeating [6] - A resurgence in U.S. shale output could occur if prices fall significantly below $70 per barrel, which is undesirable for OPEC [5][6]