Oil prices could average $60 a barrel in 2025 without deeper OPEC+ production cuts, Citi says

(Reuters) – If the OPEC+ group of producers does not cut output further, the average price of oil could fall to $60 a barrel in 2025 due to reduced demand and increased supply from non-OPEC countries, Citi said in a note on Wednesday.

Citi said that while a technical rebound was possible, the market could lose confidence in OPEC+’s ability to defend the $70/barrel level if the group does not commit to extending current production cuts indefinitely.

If Brent prices fall below $60, financial flows could push them further down, perhaps to $50 a barrel before a potential rebound, Citi analysts said.

Geopolitical tensions were initially expected to push up oil prices, but each rally since October 2023 has weakened prices, Citi said. It added that the market now recognizes that tensions do not necessarily lead to production cuts or transit issues, making the rallies a selling opportunity.

The recent return of production in Libya and expectations that the disruption will be short-lived, given the absence of ongoing hostilities, have led some market participants to resume shorting oil, he said.

Citi recommends selling on rallies when Brent approaches $80, given current market momentum.

Last week, Goldman Sachs responded to the change in outlook by cutting its average Brent forecast for 2025 and its price range by $5 a barrel, citing slowing demand in China.

In contrast, UBS expects Brent to rise above $80 a barrel in the coming months, arguing that the oil market remains undersupplied despite weak Chinese demand, while demand remains strong in other countries.

After last week’s price decline, market positioning could indeed trigger a short-term rebound, potentially pushing prices closer to $80 a barrel, Citi said.

“However, with strong summer demand due to oil burning in the Middle East and the driving season over, the market is expecting a softer market.”

On August 1, OPEC+ confirmed a plan to begin reducing the final tranche of cuts – 2.2 million bpd – in October, with the caveat that the measure could be suspended or reversed if necessary.

However, OPEC+ is discussing a delay in a planned output increase next month as oil prices hit a nine-month low, three sources from the producer group told Reuters. [O/R]

(Reporting by Sherin Elizabeth Varghese in Bangalore; Editing by Mark Heinrich)