Citi predicts that oil prices will crash to the $60s level in coming months as inventories build up after a tight market this summer, indicating a bearish outlook despite current high demand and elevated prices.
Oil prices have recovered from early June losses when OPEC+ hinted at increasing supply in the fourth quarter, causing bearish market signals. Early on Friday, Brent Crude, the international benchmark, traded above $85 per barrel, while the U.S. benchmark, WTI Crude, was above $82 a barrel, as signs of a tightening physical market emerged.
The market anticipates strong summer demand in the third quarter but fears that consumption growth will decline in the fourth quarter, putting downward pressure on oil prices.
Citi, one of the most bearish major banks, expects oil to fall into the $70s later this year and further to the $60s in 2025 due to substantial inventory builds.
“Global inventories will be building a lot next year,” Citi’s global energy strategist Eric Lee told Yahoo Finance in an interview this week.
“We do think that there is a bit of a tight stretch [with supply] through the summer, so we see prices staying in the low- to mid-80s for a little longer,” Lee added.
“But as we’re looking through the second half of the year into 2025, we really see markets getting a lot weightier.”
Citi also expects global oil demand growth to slow, predicting that “oil demand can grow at a slower and slower rate relative to GDP and in fact peak before the end of this decade,” Lee told Yahoo Finance.
Citi holds one of the most bearish near and long-term views on oil prices and demand. In contrast, Goldman Sachs reported this week that “peak oil demand is still a decade away.”
Earlier this month, the International Energy Agency forecasted that global oil demand would peak before 2030, a prediction criticized by OPEC. OPEC Secretary General Haitham Al Ghais stated that “peak oil demand is not on the horizon” and that the IEA’s forecast “is a dangerous commentary, especially for consumers, and will only lead to energy volatility on a potentially unprecedented scale.”
Goldman Sachs analysts believe oil usage will increase through 2034. They stated, “While some prominent forecasters have predicted oil demand will peak by 2030, our researchers expect oil usage will increase through 2034.”
“We think peak demand is another decade away, and more importantly, after the decade it takes to peak, it plateaus, rather than sharply declines, for another few years,” wrote Nikhil Bhandari, co-head of Asia-Pacific Natural Resources and Clean Energy Research, and analyst Amber Cai in their report.
In the near term, Goldman Sachs sees Brent crude at $86 per barrel this summer amid strong consumer demand, leading to a significant market deficit in the third quarter. The investment bank also sees a floor of $75 per barrel under Brent due to physical demand for crude, which tends to rise amid lower prices, including in China and the U.S. for the refill of the Strategic Petroleum Reserve (SPR).
