Oil prices could slip below $60 if China holds back on buying, says energy expert

Global oil markets are likely to move into a supply surplus later this year, which could push crude prices below $60 per barrel if China postpones replenishing its strategic petroleum reserves, according to Christof Ruehl, Global Adviser at Crystol Energy.

Ruehl expects excess production to outweigh consumption in the coming months as shipping through the Strait of Hormuz normalises and geopolitical disruptions ease. He believes the market outlook for the second half of the year depends largely on China’s buying strategy and inventory build-up.

“I believe that we will be surprised by the amount of excess production over consumption in oil markets we will see for the rest of this year,” Ruehl said, adding that the pace at which China rebuilds its reserves will determine how far prices decline.

He said crude could briefly fall below $60 a barrel if China waits for lower prices before returning to the market.

Ruehl noted that vessel traffic through the Strait of Hormuz is steadily recovering after recent disruptions, helping ease concerns over global oil supplies.

“As long as the trend is one of more ships and not one of disruption, it’s good news for consumers of oil because it’s good news in terms of bringing prices down,” he said.

On the supply side, Ruehl said the latest production increases by OPEC+ members, along with rising output from countries including the UAE, Russia, Iraq and Iran, point to an increasingly well-supplied market.

He also warned that OPEC could face structural challenges if global oil demand peaks in the coming years.

“If, in a few years’ time, we look in the rear-view mirror and 2025 has been the year of peak oil, that would be a real game changer,” Ruehl said.

According to him, managing production becomes more difficult in a shrinking market because producers are forced to compete for market share instead of benefiting from rising demand. The UAE’s decision to leave OPEC, he added, could increase competitive pressure on the remaining members if more countries choose a similar path.

While Ruehl does not see a cap on oil prices if fresh geopolitical disruptions emerge, he believes downside risks currently dominate. He expects the $60-per-barrel level to act as an important support area, as China is likely to step in and replenish strategic reserves if prices fall below that threshold.

For the full interview, watch the accompanying video

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