The race to dominate the…
Oil markets have kicked off…
Oil demand forecasts will likely be revised downward further, Citi’s Ed Morse said in a Bloomberg Television interview on Wednesday.
“Almost everybody has reduced their expectations of demand for the year,” Morse said, adding that demand was “simply not growing on an empirical basis to the degree that people had expected.”
Citigroup has reduced its oil demand forecast by a third, to between 2.4 million bpd and 2.5 million bpd—close to outlooks provided by the EIA and IEA. Morse expects to see even further downward revisions in demand.
Part of the reason for the lower oil demand outlook is disappointing oil demand from China and high gasoline prices that will keep a lid on demand this summer.
Yesterday, a Citigroup report suggested that oil prices could tumble to $65 per barrel by the end of this year and to $45 per barrel by the end of next year, based on a global recession and lack of market intervention by OPEC+. Citi noted, however, that this case was not its base case, and that it did not foresee a global recession.
Citi continues to be bearish on oil, maintaining that crude oil is overvalued and should be trading in the $70 range, not in the $100 range.
Citi may not see a recession on the horizon, but the fear of a recession has cooled oil prices this week, with WTI now trading well under $100 per barrel at $95.90 at 12:20 pm ET. Brent crude is also trading sub-$100, at $99.37—the first sub $100 mark since mid-April.
Citi’s base case is for oil to sink to $85 per barrel. “There’s no evidence that we’re going to see this summer surge in driving and summer surge in demand. The price is too high,” Morse said on Wednesday.
By Julianne Geiger for Oilprice.com
More Top Reads From Oilprice.com:
Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.