Citi says oil prices in 2025 could average $60/bbl if OPEC+ does not further reduce their cuts

Citi reported in a Wednesday note that if the producer group OPEC+ does not reduce its production, oil prices could fall to $60 per barrel in 2025 because of reduced demand and an increase in supply from non-OPEC nations.

Citi stated that while a technical recovery was possible, the markets could lose faith in OPEC+ defending $70/bbl if they don't commit to extending the current output cuts indefinitely.

Citi analysts said that if Brent prices drop into the $60s then financial flows may drive them even lower, perhaps to $50 per barrel, before they could recover.

Citi stated that initially, geopolitical tensions would have lifted oil prices. However, each recovery since October 2023, has been weakened. Citi said that markets now understand that tensions do not necessarily result in reduced production or transit problems, so rallies are an opportunity to buy.

It said that some participants in the market have resumed shorting oil due to the recent return of production from Libya and the expectation that disruptions will be temporary, given the absence of hostilities.

Citi recommends that you sell into rallies as Brent nears $80.

Goldman Sachs responded last week to this changing outlook by reducing its average Brent forecast for 2025 and the price range it predicted by $5 per barrel. They cited a slower demand in China.

UBS, on the other hand, expects Brent oil to reach above $80/bbl in the next few months. They argue that the market is still undersupplied, despite the weak Chinese demand.

Citi stated that following last week's drop in oil prices, the market could spark a short term rebound. This could push prices closer to 80 dollars per barrel.

The summer driving season and Mideast oil burning has ended, so the market is looking forward to a more relaxed market.

OPEC+ announced on August 1 that it would begin unwinding its most recent cuts - 2.2 millions bpd – in October. However, the plan could be halted or reversed if necessary.

Three sources within the producer group have confirmed that OPEC+ has discussed a possible delay to a planned increase in output next month, as oil prices are at their lowest level in nine months. Sherin Elizabeth Varighese, reporting from Bengaluru and Mark Heinrich, editing)

(source: Reuters)