July 5, 2022 (MLN): Crude oil prices may collapse to $65 a barrel by the end of this year while fall to $45 by the end 2023 if a demand crippling recession hits, Citigroup Inc cautioned in its latest report.
The outlook is based on an absence of any intervention by OPEC+ producers, and a decline in oil investments, analysts including Francesco Martoccia and Ed Morse said in a report.
Brent, the global crude benchmark, last traded near $113 a barrel.
Following the invasion of Ukraine, oil has risen this year and now the banks are trying to chart its course into 2023 as central banks raise interest rates and recessionary risks mount.
It is pertinent to note that Citi’s outlook compared the current energy market with the crises of the 1970s. At present, the bank’s economists do not expect the US to dip into recession.
“For oil, the historical evidence suggests that oil demand goes negative only in the worst global recessions,” the Citi analysts said in the July 5 note. “But oil prices fall in all recessions to roughly the marginal cost.”
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