WTI, Brent Prices Seen Sliding Amid Gulf Supply Surge

Oil prices are expected to decline this year and next as supply increases due to rising production from Gulf countries, according to Julius Baer. Norbert Rücker, head of economics and next generation research at Julius Baer, said that the diplomatic gridlock between Washington and Tehran has kept uncertainty elevated, but the underlying fundamentals point to a more benign supply outlook.

The global oil market is holding up better than feared, with global and US oil inventories maintaining their levels. This is partly due to softer global demand and continued flows of crude through the Strait of Hormuz. Consumer demand has remained resilient in Western markets, but other regions may be experiencing prolonged softness in oil demand.

The movement of oil through the strait via smaller vessels without transponder signals is complicating efforts to track flows using conventional methods. Releases from strategic petroleum reserves have reached roughly half of the volumes originally pledged in March. Julius Baer maintains its 'Cautious' view and short position on oil due to the improved supply picture.