On Wednesday, Citi (NYSE: C) stated that if OPEC+ doesn't cut production further, the average price of oil could fall to $60 per barrel in 2025, driven by reduced demand and increased supply from non-OPEC countries.
In particular, Citi analysts warned that if Brent prices drop into the $60s, financial flows could push them down further, potentially to $50 per barrel before any rebound, reported Reuters.
Nevertheless, Citi noted that while a technical rebound in oil prices is possible, the market may lose confidence in OPEC+ maintaining the $70 per barrel level if the group doesn't commit to extending current output cuts indefinitely.
Citi adds that the market now realizes tensions don't always result in reduced production or transit issues, turning rallies into selling opportunities. Libya's recent production recovery and the expectation of a brief disruption, given the absence of continued hostilities, have prompted some market participants to resume shorting oil.
Consequently, Citi recommends selling into rallies when Brent nears $80, considering current market conditions.
As per the report, on August 1, OPEC+ confirmed a plan to begin unwinding the latest round of cuts-2.2 million barrels per day-starting in October, with the option to pause or reverse the plan if necessary. However, as oil prices hit a nine-month low, OPEC+ is now considering delaying the planned output increase next month, according to three sources from the producer group cited by Reuters.
Last month, Goldman Sachs trimmed Brent crude forecast by $5, setting a new range of $70-$85, citing higher OECD inventories and weaker China demand.
On Tuesday, Goldman Sachs reportedly stated AI could lower oil prices over the next decade by reducing costs and increasing recoverable resources, boosting supply.
The bank says that AI's impact on energy and metals has largely centered on the demand side, anticipating a rise in power demand. However, a negative effect on oil prices could reduce the incomes of producers, including OPEC+ members.