Investing.com -- OPEC+'s reported plan to increase oil output from Dec. 1 would mark an earlier-than-anticipated rebound in supply to the market, potentially weighing on crude prices, according to analysts at HSBC.
In a note to clients, the analysts said that, should the Organization of the Petroleum Exporting Countries and its allies -- known as OPEC+ -- confirm these reports, it would be the end of a long-standing supply tightening cycle that saw the producer group restrict around 3.4 million barrels per day from October 2022.
"The earlier return of OPEC+ barrels is incrementally bearish," the HSBC analysts argued, adding that they expect the oil market to be in a surplus of roughly 600,000 next year.
Over the medium-term, they also said the oil market looks set to be oversupplied "as OPEC+ has no space to unwind remaining cuts."
As a result, they reduced their forecasts for Brent oil prices for 2025 and beyond from $76.5 per barrel to $70 per barrel.
On Tuesday, oil prices dropped sharply as concerns of tepid demand growth offset worries that escalating tensions in the Middle East could hit global supply.
By 06:10 ET, the Brent contract dropped 1% to $71.02 per barrel, while U.S. crude futures (WTI) traded 1.2% lower at $67.36 per barrel.
Israel said early on Tuesday that its troops had begun "limited" raids against Hezbollah targets in the border area of Lebanon, a move that risks escalating a conflict in the oil-rich Middle East that threatens to suck in the US and Iran.
However, this has had a limited impact as a sharp drop in Chinese manufacturing activity in September suggested a slowdown in future demand from the world’s largest importer of crude.
The American Petroleum Institute industry group is set to reveal its weekly estimate of US crude oil and fuel stockpiles in the week to Sept. 27.