Oil prices are likely to go down in the next few months because Saudi Arabia has cut back on production, which has caused prices to go up too high, according to Paul Sankey, an energy analyst.
Demand for US gasoline has been slowing down, and the supply side of the market is expected to stay the same. Sankey said it’s unlikely that Saudi Arabia will cut production any further, as they’ve already cut output by 9 million barrels per day and any further cuts would hurt their market share.
Meanwhile, US oil production has been holding up, and supply from sanctioned regimes like Iran and Venezuela is helping to make up for the cuts.
“All of those things haven’t really been appreciated by the market, I don’t think, but essentially, it allows for much more oil supply from sanctioned nations,” he said.
While factors such as a recent Canadian pipeline outage or production-cut decisions made by Russia could still swing oil markets in either direction, Sankey said wholesale prices would soon come in lower as demand keeps sliding.
“You will see lower prices at the pump over the coming months,” he added.