Raymond James Oil Market Outlook - Mar 10

[dan_s]

Oil “downside” volatility rears its head again — is the range-bound market view about to break? Our oil price view for the past year-plus has been consistent: a range-bound market largely at the direction of OPEC+ policy that would need an ‘event’ to push the market away from the ~$65-85/Bbl window that has held since late 2023. With WTI again testing the bottom of this range, the combo of macro/policy uncertainty (tariffs, trade wars) and upcoming OPEC+ production increases has market sentiment as ugly as we’ve seen it in some time. In today’s Stat, we’ll 1) outline our core supply/demand thesis, 2) highlight the upside and downside risks that we see for the oil market, and 3) offer our views on what oil price range we see as likely.


Supply/demand outlook: Are markets ‘tariff-ied’ over nothing? We see a balanced market for 2025 and 2026. Our oil model has been fairly consistent for the past several quarters — strong enough to allow some OPEC+ barrels to come back to the market this year and next, but not strong enough to generate meaningful upside to the oil price. Our updated model highlights a very slight draw in 2025, followed by a very slight build in 2026. Ironically, 1Q25 is the tightest time period in our model, as weather-related supply disruptions and demand bumps push our model into a decent deficit. That said, as supply recovers and demand normalizes — combined with OPEC+ barrels returning starting in 2Q25, our model gradually loosens. All told, the fundamental view in terms of supply-demand outlook remains pretty steady-state — supporting our call for a continued range-bound market (our price deck is below the s/d model). We’re reiterating our previous $70/bbl oil price forecast that we had going into the year.

Upside risks — Iran/Venezuela (and Russia) sanctions, slower OPEC+ unwind, low inventories, and demand growth ‘surprise.’

Downside risks — Trump Administration desire for lower prices, tariffs dent the demand outlook, no sanctions supply loss, OPEC+ unravel. Do inventories even matter?

Conclusion: OPEC+ balances range-bound market… but Trump may change the calculus