Citi lowers Brent price outlook for 2024 and 2025 on oversupply fears
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Jan 12 (Reuters) – Citi Research on Friday lowered its Brent price forecasts for this year and 2025, citing oversupply concerns but expects prices holding above $70 per barrel in 2024 as OPEC+ keeps global oil markets “finely balanced”.
Citi cut its 2024 Brent price forecast by $1 to $74 per barrel and slashed 2025 forecast by $10 to $60 per barrel, but said in a note that recent activity in the Red Sea causing further tension in the Middle East could see near-term upside to the risk premium.
The United States and Britain launched strikes from the air and sea against Houthi military targets in Yemen in response to the movement’s attacks on ships in the Red Sea, a dramatic regional widening of the Israel-Hamas war in Gaza.
Brent crude futures were trading around $80 a barrel, while U.S. West Texas Intermediate crude futures were at $75 as of 1124 GMT.
“We believe softer market fundamentals, absent major supply disruptions, will result in OPEC+ rolling over its Q1 2024 production cuts throughout the whole 2024 and start tapering them only in H2 2025,” analysts at Citi said.
Last month, the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, have pledged to cut 2.2 million barrels per day (bpd) for the first quarter of 2024.
“2025 looks to pose more challenges for OPEC+, as a large surplus looms despite extended production cuts, which in our base case is likely to make it increasingly difficult to protect $70/bbl on a Brent basis,” Citi noted.
Citi said global oil markets would likely flip into a 1.2 million bpd surplus on average, assuming OPEC+ starts tapering the production cuts in the second half of 2025.
Prices are likely to stay near $80 a barrel in 2024, a Reuters poll showed, as analysts predicted weak global growth would cap demand, while geopolitical tensions could provide support.
In November, the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, agreed to voluntary output cuts totalling about 2.2 million barrels per day (bpd) for early this year led by Saudi Arabia rolling over its current voluntary cut.
“We model a significant 2025 surplus even if OPEC+ holds cuts to end-2025,” Citi added in the note.
On Thursday, Barclays lowered its Brent crude prices forecast for this year by $8 to $85 per barrel, but noted that oil looks undervalued.
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):
Brokerage/Agency
Brent
WTI
Date Revised
2024
2025
2024
2025
Citi Research
$74
$60
–
–
Jan. 12
DNB
$82
$85
–
–
Jan. 12
Barclays
$85
–
$81
–
Jan. 11
BMI
$85
$84
$82
$81
Jan. 11
Morgan Stanley*
$75
–
$71
–
Jan. 3
JP Morgan
$83
$75
$79
$71
Dec. 14
* indicates end-of-period forecast
# current as of given date, may not indicate date of revision
