According to a note from Citi, if the OPEC+ producer group does not further reduce production, the average price of oil could plummet to $60 per barrel in 2025 due to decreased demand and increased supply from non-OPEC countries. This could lead to financial flows driving prices down even further, potentially hitting $50 per barrel before a rebound.
Citi warns that without a commitment from OPEC+ to extend current output cuts indefinitely, the market may lose confidence in the group's ability to defend the $70/bbl level. Geopolitical tensions, which were initially expected to boost oil prices, have not had a lasting impact, with each rebound since October 2023 weakening. The market now sees rallies as opportunities to sell, as tensions do not always result in reduced production or transit issues.
Recent developments, such as Libya's production return and the expectation of short-lived disruptions, have led some market participants to resume shorting oil. Citi advises selling into rallies when Brent approaches $80, given the current market dynamics.
Goldman Sachs has revised its average 2025 Brent forecast downward, citing slower demand in China. In contrast, UBS predicts Brent will surpass $80/bbl in the coming months, arguing that the oil market remains undersupplied despite weak Chinese demand.
Despite a recent price drop, market positioning could trigger a short-term rebound, potentially pushing prices back towards $80 per barrel. However, with the end of the summer demand season, the market is expected to loosen.
OPEC+ has confirmed plans to start unwinding recent production cuts from October, but discussions are underway to delay a planned output increase next month as oil prices hit a nine-month low, according to sources from the producer group.
Overall, the outlook for oil prices remains uncertain, with conflicting views from major financial institutions. Investors should closely monitor market dynamics and geopolitical developments to make informed decisions about their investments.