Stock markets in the GCC ended a mixed bag on Monday, weighed down by weaker oil prices, while investors await clarity on the extent of the oil slump and the U.S. interest rate outlook.
Oil prices, a key determinant of GCC financial markets, continues to fall amidst the possibility of a resolution to the war in Ukraine and ongoing saturation in the market.
Oil Price Drop
Brent crude oil traded at $62.42 per barrel as markets closed yesterday.
Oversupply is an ongoing determinant of the sustained fall in oil prices this year and in 2026.
Analysts at Goldman Sachs forecast a sustained fall in oil prices until 2027 if OPEC fail to cut production according to Daan Struyven, Goldman Sachs co-head of global commodities research in a CNBC interview.
Non-OPEC: Declining Role of Supply Constraints
Even if OPEC cut oil supply, the emergence of non-OPEC producers, the U.S., Canada and Brazil, continue to ramp-up supply irrespective of any potential OPEC cuts.
The oil market as we know it is changing, factoring in headwinds in global demand owing to a slowdown in aggregate demand in emerging markets: China, Nigeria, and other emerging economies.
Any resolution on Ukraine may sustain oversupply as Rosneft and Lukoil pump crude back into the market following the possible removal of sanctions in the medium term.
Forecasts:
Looking to 2026, oil prices will depend on the resilience of non-OPEC producers’ appetite to increase production.
In this case, oil prices could fall even further whilst prices may rally back up if OPEC production cuts are sustained and the war in Ukraine carries on into 2027.
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