Citigroup has bucked the bullish oil price forecast trend in analyst circles, expecting oil prices to dip instead of rally further despite OPEC+’s efforts in that direction.
By Oil Price – Irina Slav
Apr 11, 2023
The bank’s commodity chief Ed Morse noted that China’s post-pandemic recovery was progressing more slowly than initially expected and that could affect demand patterns, ultimately hurting prices.
We’re waiting to see what’s really happening with the economy, but it is a slower recovery,” Morse told Bloomberg. “If anything, that will be an end-of-year phenomenon.”
What’s more, Citi believes that traders may be underestimating additional oil output potential in Venezuela and Iraq, which, if it materializes, would offset some of the latest OPEC+ cuts.
In fairness, Iraq is one of the participants in the latest round of cuts, committing to reduce its oil production rate by 211,000 bpd.
Venezuela, for its part, just reported higher oil exports for March after the end of a review into past deals after it emerged that many of the oil cargoes sent overseas had not been paid for.
The country exported more than 700,000 bpd of crude last month, mainly thanks to more cargoes being lifted by Chevron, which was recently allowed by the White House to return to Venezuela.
Besides Citi, Morgan Stanley is also bearish on oil even after the OPEC+ cuts. In fact, the bank reduced its oil price target after the OPEC+ announcement, arguing that the latest move of the cartel was a probable admission from the biggest producers that demand may not be doing too well in the coming months.
“OPEC probably needs to do this to stand still,” Martijn Rats, chief commodity strategist at Morgan Stanley, said.
However, the decision “reveals something, it gives a signal of where we are in the oil market. And look, let’s be honest about this, when demand is roaring…then OPEC doesn’t need to cut,” Rats noted.
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Read More: Oil Price – Citi Bucks The Bullish Trend, Bets Oil Prices Will Fall
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