Citi says oil prices in 2025 could average $60/bbl without deeper OPEC+ cuts.

(Reuters) – If the OPEC+ producer group does not cut production further, the average oil price could fall to $60 a barrel in 2025 due to reduced demand and increased supply from non-OPEC countries, Citi said in a note from wednesday.

Citi said that while a technical rebound was possible, the market could lose confidence in OPEC+ defending the $70/bbl level if the group does not commit to extending current production cuts indefinitely.

If prices fall into the $60s, financial flows could drive them lower, possibly as low as $50 a barrel, before a potential rebound, Citi analysts said.

Geopolitical tensions were initially expected to push oil prices higher, but every bounce back to October 2023 has been bearish, Citi said. He added that the market now recognizes that the tensions do not necessarily lead to lower production or transit problems, making the rallies an opportunity to sell.

The recent rebound in production in Libya and expectations that the disruption there will be short-lived given the lack of ongoing hostilities have led some market participants to resume shorting oil, it said.

Citi recommends selling in rallies when Brent approaches $80, given current market dynamics.

Goldman Sachs responded to this change in outlook last week by cutting its average Brent forecast for 2025 and price range by $5 a barrel, citing slower demand in China.

Instead, UBS expects Brent to rise above $80/bbl in the coming months, arguing that the oil market remains undersupplied despite weak demand from China as demand remains strong elsewhere.

After last week’s price drop, market positioning could indeed trigger a near-term rally, potentially pushing prices closer to $80 a barrel, Citi said.

“However, the strength of summer demand from Middle East oil burning and the driving season is over, so the market is looking towards a looser market.”

On August 1, OPEC+ confirmed a plan to begin unwinding the latest layer of cuts – 2.2 million bpd – from October, with the warning that this could be halted or reversed if necessary.

However, OPEC+ is discussing a delay in a planned output increase next month as oil prices hit a nine-month low, three sources at the producer group told Reuters. (OR)