OPEC+ Faces Potential Oil Price Drop to $60 per Barrel by 2025, Citi Warns
According to Citi, if OPEC+ does not implement further production cuts, the average price of oil could plummet to $60 per barrel in 2025 due to decreased demand and increased supply from non-OPEC countries. The financial institution also stated that a technical rebound is possible, but market confidence in OPEC+ defending the $70/bbl level may diminish if current output cuts are not extended indefinitely.
If prices dip into the $60s, financial flows could drive them even lower, potentially reaching $50 per barrel before a potential recovery, analysts at Citi explained. Geopolitical tensions were initially expected to boost oil prices, but recent rebounds have been weakening since October 2023. Citi noted that the market now understands that tensions do not necessarily result in reduced production or transit issues, making rallies an opportunity to sell.
Recent production resumption in Libya and the expectation of short-lived disruptions due to the lack of ongoing hostilities have prompted some market participants to resume shorting oil, Citi reported. The financial institution suggested selling into rallies when Brent approaches $80, considering the current market dynamics.
Goldman Sachs recently revised its average 2025 Brent forecast and price range downward by $5 per barrel, citing slower demand in China. On the other hand, UBS anticipates Brent to surpass $80/bbl in the coming months, arguing that despite weak Chinese demand, the oil market remains undersupplied due to strong demand in other countries.
Following a recent price drop, market positioning could trigger a short-term rebound, potentially pushing prices closer to $80 per barrel, according to Citi. However, with summer demand strength from Mideast oil burn and the conclusion of the driving season, the market is looking towards a looser market ahead.
OPEC+ has confirmed a plan to begin unwinding the most recent layer of cuts starting in October, but this could be paused or reversed if necessary. The producer group is also considering delaying a planned output increase next month as oil prices hit their lowest in 9 months, according to sources.