How are energy investors positioned?
Investing.com -- Oil prices are set to face more pain in the months ahead as crude demand dwindles, but the opportunity to buy the dip is coming as falling prices will force OPEC+ and U.S. shale producers to curtail oil supply.
"We continue to see $60/bbl Brent (or lower) in our base case over the next three months, as demand is likely to undershoot for a period owing to the onset of US trade tariffs," Citi analysts said in a recent note.
Citi has been bearish on oil prices for months, calling for a $60-65/bbl target as early as December 2024, but turned even more bearish on concerns that U.S. tariffs will hurt global economic growth and squeeze oil demand.
"Our economists downgraded their global GDP growth forecast to around 2% for 2025, resulting in us lowering our global oil demand growth expectation by 0.2-m b/d to just over 0.7-m b/d," the analysts said.
The pressure in oil prices, however, could subside by the second half of the year as non-OPEC and OPEC+ countries will be forced to rein in supply and rebalance the market.
The analysts expect OPEC+ to keep production flat at May 2025 levels through mid-3Q’25 and continue to phase out its production cuts from Aug’25 onwards, "instead of bringing forward the whole production profile by three months."
With fewer barrels expected to come market , hte analysts forecast oil prices rebounding to around $60 to $65 per bbl range through 2H’25.
Citi’s call for a rebound in the H2, however, faces a threat from "the trade shock impact on global oil demand, less proactive OPEC+ policy, and the potential for an earlier resolution to the Russia-Ukraine conflict and an Iranian deal," the analysts said.