Citi reiterates oil price estimate of $60 amid ‘bearish trend’

We could see oil prices of $60 a barrel next year if OPEC+ fails to implement more production cuts, Citi said in a note to clients on Wednesday, citing slowing demand and strong supply from non-OPEC producers .

Further to oil prices, Citi said that once Brent crude prices fall into the $60 range, they could be pushed further to $50 a barrel due to financial flows before rebounding.

Citi noted that geopolitical tensions do not have a large, direct impact on oil prices. While geopolitical tensions temporarily boosted oil prices, Citi said each rebound is weaker than the last. In addition, Citi noted that the market now seems to understand that geopolitical tensions do not immediately mean supply disruptions. This makes every major Israel-Gaza headline an opportunity to sell in the temporary rise.

Citi is concerned that if OPEC refrains from extending production cuts beyond its current plan, the market could lose confidence in the cartel’s ability to defend oil at $70.

Citi has issued dire forecasts like this before and been wrong before.

In June, Citi issued another gloomy forecast for 2025, anticipating Brent crude at $60 in a long-term bearish trend. Citi said it expects a global oil market surplus through 2025 despite OPEC+ production cuts. At that time, just three months ago, Citi advised oil producers to hedge against potential price declines and advised investors to take advantage of short-term price increases by taking bearish positions.

Oil prices fell to their lowest level in nine months on Wednesday amid concerns about demand and potential supply increases.

Citi’s note to clients also comes as OPEC+ is said to be reconsidering its plan to scale back production cuts in October due to falling prices. At the time of writing, Brent crude was trading below $73 and the US benchmark WTI was trading below $70.

By Charles Kennedy for Oilprice.com

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