Investing.com — Strategists at Citi Research say oil prices could fall to around $60 a barrel by 2025, citing a significant market glut as the main driver.
While recent supply disruptions in Libya and a delayed production cut by OPEC+ have provided near-term support for Brent prices in the $70-$72 range, Citi sees this as temporary.
“At the time of writing, markets have not reacted to OPEC+’s decision, with Brent flat ahead of the September 4 close. Still, resolving the situation in Libya could take months rather than a week, strategists wrote.
They highlight the likelihood that a strong market surplus will emerge next year, causing prices to fall.
“We recommend selling Brent with a rise towards ~$80, while looking ahead to a decline to $60 in 2025 if a significant market surplus emerges,” the note said.
OPEC+ has postponed the start of the planned production cut from October 2024 to December 2024, with the process now set to be completed by the end of 2025. This decision is in response to recent market weakness and price declines, despite ongoing disruptions to Libyan oil production. supplies and broader economic concerns in the US and China.
In addition, Bank of America’s Commodities Research team revised its price forecast downward to $75 per barrel for the second half of 2024, down from almost $90, and lowered it for 2025 from $80.
The team expresses concern about growing global oil supplies, despite the assumption that OPEC+ will delay planned production increases. They note that weaker demand growth, combined with OPEC+’s record spare capacity of more than 5 million barrels per day, has clouded the outlook for oil prices.
“In fact, we now see Brent oil prices moving from the top to the middle of our unchanged $60-80/barrel medium-term range faster than previously warned,” BofA strategists said. This excess capacity, together with slower demand, also reduces the risk of price spikes due to potential geopolitical disruptions.
