OPEC+ Production and Oil Price Outlook

(Reuters) – If producer group OPEC+ doesn’t reduce production further, the average price of oil could drop to $60 per barrel in 2025 due to reduced demand and increased supply from non-OPEC countries, Citi stated in a note on Wednesday.

Citi indicated that while a technical rebound was possible, the market might lose confidence in OPEC+ defending the $70/bbl level if the group doesn’t commit to extending current output cuts indefinitely.

If Brent prices dip into the $60s, financial flows could push them down further, possibly to $50 per barrel before a potential rebound, according to Citi analysts.

Geopolitical tensions were initially expected to drive up oil prices; however, each rebound since October 2023 has weakened, as the market now recognizes that tensions don’t necessarily lead to reduced production or transit issues, making rallies an opportunity to sell.

Libya’s recent production return and expectations of a brief disruption due to the lack of ongoing hostilities have caused some market participants to begin shorting oil, Citi noted.

Citi recommends selling into rallies when Brent nears $80, based on current market dynamics. Goldman Sachs recently revised its average 2025 Brent forecast and price range downward by $5 per barrel, citing slower demand in China.

In contrast, UBS anticipates Brent will rise above $80/bbl in the coming months, asserting that the oil market remains undersupplied despite weak Chinese demand, as demand persists in other countries.

Following last week’s price drop, market positioning could lead to a short-term rebound, potentially pushing prices closer to $80 per barrel, according to Citi.

However, summer demand strength from Middle Eastern oil burn and the driving season has concluded, suggesting a more relaxed market ahead.

On August 1, OPEC+ confirmed plans to start unwinding the most recent layer of cuts – 2.2 million bpd – from October, although this could be paused or reversed if necessary. However, OPEC+ is considering delaying a planned output increase next month as oil prices have reached their lowest in nine months, according to three sources from the producer group.