Eric Lee, Citigroup‘s global energy strategist, anticipates that oil prices will peak this summer and then essentially stay elevated until next year when global stockpiles are expected to increase significantly, leading to a substantial decline in oil prices by 2025. The entire summer will see a bit of tightness in supply, hence prices are indeed expected to linger around $80 to $85 for some time. However, looking ahead to the second half of 2025, we do see the market becoming more bearish.
On Thursday, West Texas Intermediate crude oil edged slightly higher above $82 per barrel, while the international benchmark Brent crude saw a slight uptick above $85 per barrel.
Lee predicts that later this year, Brent crude prices will start to fall into the $70 per barrel range and will drop to the $60 per barrel range by 2025.
His forecast comes as OPEC+ expresses intentions to gradually phase out voluntary production cuts. The organization is facing pressure from member countries to lift the cuts to avoid losing market share.
Lee stated, “In our base case, after the market roughly balances out this year, global oil inventories are expected to increase by 1.4 million barrels next year. I think as the market sees that, it’s going to weigh on prices. Growth in oil demand will continue to slow, partly due to the transition to electric vehicles. The rate of growth in oil demand relative to GDP may slow down and could actually peak by the end of this decade.”
While other analysts also foresee a potential drop in oil prices next year, Citigroup is known for its relatively pessimistic oil price forecasts compared to other Wall Street firms.
JPMorgan strategists project an average Brent oil price of $75 next year, a significant decrease from $83 in 2024.
Natasha Kaneva, JPMorgan’s global head of commodity strategy, stated in a recent report, “As the final stage of the post-pandemic rebound fades, coupled with improved energy efficiency and an increase in the number of electric vehicles, global oil demand growth might slow from 1.4 million barrels per day this year to 1 million barrels per day by 2025.”
Meanwhile, Goldman Sachs forecasts that after facing supply tightness this summer, the average price of Brent crude for this year will reach $84. The company’s analysts predict that the international benchmark price will average $82 in 2025.
