Citi Cuts Brent Price Forecast to $74 per Barrel

Citi has revised its Brent oil price forecasts for 2024 and 2025, citing concerns over potential oversupply while acknowledging the possibility of near-term price increases due to tensions in the Middle East. Citi has lowered its 2024 Brent crude oil price forecast by $1 to $74 per barrel and made a more substantial adjustment to its 2025 projection, reducing it by $10 to $60 per barrel. These changes reflect Citi’s expectation of an oversupplied market in the coming years despite ongoing geopolitical risks that could temporarily drive prices higher.

The current market environment reflects a delicate balance between supply constraints and demand fluctuations. OPEC+’s decision to extend cuts is seen as a move to stabilize prices amid these fluctuations. However, the effectiveness of these cuts is often influenced by the compliance levels of member countries and the production responses of non-OPEC oil producers, particularly in the United States.

Recently, oil prices have sharply declined to a three-month low, driven by demand concerns and diminishing geopolitical risk premiums. The Energy Information Administration (EIA) reported a US crude inventory decline of 1.362 million barrels, falling short of the expected 1.430 million barrels. This followed a significant 7.3 million-barrel increase in US crude stocks, the largest since February. Concurrently, the United Arab Emirates has boosted production capacity, with Abu Dhabi National Oil Co. now able to pump 4.85 million barrels per day, up from 4.65 million barrels per day at the end of last year.

Citi’s analysis suggests a significant surplus in 2025, even if OPEC+ continues its production cuts until the end of that year. This projection indicates that the oversupply issue could persist, putting downward pressure on prices despite any short-term geopolitical disruptions. Barclays also revised its Brent crude price forecast, lowering it by $8 to $85 per barrel for this year. Despite the reduction, Barclays highlighted that oil prices might still be undervalued, suggesting potential for future adjustments as market conditions evolve.

The following is a list of the latest brokerage forecasts for 2024 and 2025 average prices per barrel for Brent and WTI (in $ per barrel):

*** JPMorgan 2025 Brent and WTI forecasts were introduced on Nov. 20, 2023.

Source: Reuters

The oil market has been subject to various external shocks, including the ongoing war in Ukraine, which has disrupted supply chains and caused fluctuations in energy prices globally. Additionally, the potential for new sanctions on oil-producing countries, changes in production policies, and shifts in energy consumption patterns due to economic growth or contraction can all significantly impact oil prices.

The latest adjustments to Brent crude price forecasts by Citi and other major banks underscore the complex interplay between supply dynamics and geopolitical risks in the global oil market. While oversupply concerns dominate the long-term outlook, ongoing tensions in the Middle East and other geopolitical factors could lead to short-term price volatility.