Citi Research has revised its Brent crude oil price forecasts for 2024 and 2025, expressing concerns over oversupply in global markets. Despite anticipating a finely balanced market in 2024, with prices expected to remain above $70 per barrel, the financial institution has adjusted its projections downward.
The latest forecast from Citi trims the 2024 Brent price outlook by $1 to $74 per barrel, and more significantly, reduces the 2025 forecast by $10 to $60 per barrel. The downward adjustments are attributed to apprehensions about a potential surplus in the global oil market, reflecting softer market fundamentals absent major supply disruptions.
However, Citi analysts highlighted that recent tensions in the Middle East, particularly the Red Sea, due to Houthi rebel activities, could introduce near-term upside risks to the risk premium associated with oil prices. The United States and Britain launched air and sea strikes against Houthi military targets in response to their attacks on ships in the Red Sea, marking an escalation in the regional conflict.
As of the latest data, Brent crude futures were trading at around $79 a barrel, while U.S. West Texas Intermediate crude futures were trading around $73.60.
Citi’s analysis suggests that, barring significant supply disruptions, OPEC+ is likely to extend its Q1 2024 production cuts throughout the entire year of 2024. The institution anticipates OPEC+ starting to taper production cuts only in the second half of 2025.
The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, had pledged to cut 2.2 million barrels per day (bpd) for the first quarter of 2024. Looking further ahead, Citi sees challenges for OPEC+ in 2025, with a looming large surplus, even with extended production cuts. This surplus, according to Citi’s base case, could make it increasingly difficult to maintain a Brent crude price of $70 per barrel.
Citi’s projections indicate that global oil markets may transition into a 1.2 million bpd surplus on average, assuming OPEC+ begins tapering production cuts in the second half of 2025. As the dynamics of the global oil market evolve, industry stakeholders and market participants will be closely monitoring developments and adjusting their strategies accordingly.