Citi Says Oil Could Crash to Sub-$60 Level

Citi analysts have painted a bleak picture for the oil market, forecasting a significant price drop by 2025. According to their latest note, they anticipate a decline to $60 per barrel for Brent crude, marking a decrease of over 20% compared to current market expectations. The report suggests that while short-term volatility may lead to some upside risks, the long-term trend is bearish.

The expected surplus in the global oil market by 2025, despite efforts by OPEC+ to curtail production, is cited as the main reason behind the pessimistic outlook. Citi advises oil producers to hedge against potential price drops and recommends investors capitalize on short-term price increases by taking bearish positions.

Contrastingly, Citi's outlook for copper is bullish, with a projected price surge to $12,000 per tonne by 2025. Factors such as constrained mine supply growth and increasing demand, particularly from China's ongoing energy transition, are driving this optimism. The report emphasizes the significant difference in volatility between oil and copper, suggesting investors exploit this imbalance.

Recent market movements reflect the ongoing uncertainty. Crude oil prices dipped following reports of an inventory increase by the U.S. Energy Information Administration (EIA). Despite a decline, optimism spurred by optimistic oil demand forecasts from both OPEC and the EIA helped buoy prices.

The EIA's revised oil demand growth outlook and OPEC's maintenance of demand growth forecasts above 2 million barrels daily indicate a positive sentiment. However, concerns over rising inventories, as highlighted by the EIA's recent report, underscore the challenges the oil market faces.

Crude oil prices were trending down on Wednesday morning after the EIA estimated a rise in crude oil inventory levels in the United States, climbing 3.7 million barrels in the week ending June 7.

By Julianne Geiger for Oilprice.com

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