Crude Oil Prices May Fall to $60 Per Barrel

Brent crude oil prices are projected to decline to approximately $60 to $70 per barrel, driven by a quicker-than-expected recovery in supply and moderate global demand, according to Senior Lecturer at i-CATS University College, Prof. Madya Dr. Abu Sofian Yaacob.

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However, if conflicts escalate again, oil prices could surge back above $90 to $110 per barrel.

However, Dr. Abu Sofian cautioned that prices could rebound sharply, potentially exceeding $90 to $110 per barrel, should geopolitical conflicts intensify. Conversely, market projections suggest Brent could even fall to the mid-$50s per barrel if global economic growth continues to falter and supply normalizes completely.

For the medium term, Dr. Abu Sofian anticipates Brent crude oil prices to remain within the $70 to $75 per barrel range, provided the Strait of Hormuz remains stable and global oil export activities recover. He noted that downward pressure on oil prices is expected to persist over the next two to six weeks. The direction of the market over the next three to six months will largely depend on demand from China, OPEC+ production policies, and the export recovery rates of Gulf nations.

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In fact, some market projections do not rule out the possibility of Brent prices falling to the mid-$50s per barrel if global economic growth continues to slow and supply returns to normal.

Dr. Abu Sofian explained that the current decline in global crude oil prices primarily reflects a decrease in the geopolitical risk premium, rather than a significant increase in physical oil supply. This is evidenced by the increased tanker activity utilizing the strategic Strait of Hormuz, signaling that the risk of global supply disruptions is not as high as previously feared. Earlier price surges were fueled by investor concerns over prolonged disruptions in the Strait, a critical global oil trade route.

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The current drop in global crude oil prices more reflects the shrinkage of the geopolitical risk premium compared to the increase in physical oil supply in the market.

Regarding potential new transit charges proposed by Iran for vessels passing through the Strait of Hormuz, Dr. Abu Sofian suggested this could increase global energy trade costs without directly impacting supply. Such a move might raise ship operating costs, marine insurance premiums, and energy shipping expenses, potentially adding a few dollars per barrel to crude oil and LNG prices. For Malaysia, this could boost petroleum-related revenue but also create inflationary pressures and increase the fiscal burden related to subsidies. He characterized the transit charge as more of a tax on global trade than a genuine disruption to world oil supply.

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This move is expected to increase ship operating costs, marine insurance premiums, and energy shipping costs, which could lead to an increase in crude oil and liquefied natural gas (LNG) prices by a few dollars per barrel.