Oil prices may fall amid changing market dynamics
(MENAFN) Citigroup has projected that the average price of oil could decline to around USD60 per barrel by 2025 due to a combination of reduced demand and an increase in supply from non-OPEC countries, according to a note released on Wednesday. Analysts from Citigroup suggested that if brent crude prices reach USD60, further financial market pressures could push them down to USD50 per barrel before any potential rebound occurs. The financial institution also noted that while geopolitical tensions were initially expected to support higher oil prices, recent market behavior has defied these expectations, with every price surge since October 2023 proving short-lived and ultimately leading to sell-offs. The note highlighted that market participants are now aware that such tensions do not necessarily result in production declines or transportation disruptions, transforming rallies into opportunities to sell.
Citigroup pointed to the resumption of Libyan oil production and the expectation that any disruptions will be brief, given the lack of prolonged conflict, as factors encouraging some investors to resume short selling of oil. The bank advises selling Brent crude if prices approach USD80 per barrel, given the current market dynamics. This view is echoed by Goldman Sachs, which recently reduced its average Brent price forecast for 2025 by USD5 per barrel, citing slower demand growth, particularly in China. On the other hand, UBS holds a more bullish view, predicting that Brent crude could climb above USD80 per barrel in the coming months. UBS argues that despite weak demand from China, the global oil market is still experiencing a supply shortfall, with strong demand in other regions potentially supporting higher prices. UBS also indicated that market conditions could lead to a short-term price recovery, moving closer to the USD80 per barrel mark after the recent declines.
Amid these differing outlooks, OPEC+ confirmed on August 1 a plan to ease the latest round of production cuts—totaling 2.2 million barrels per day—starting in October. However, the group signaled that this easing could be paused or reversed if deemed necessary. Additionally, four OPEC+ sources reported that the organization is currently considering delaying the planned increase in output next month, following a drop in oil prices to a nine-month low. This possible adjustment reflects the group's cautious approach in response to ongoing volatility in the oil market and evolving global demand and supply dynamics.
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