Crude oil could collapse to $65/bbl by year-end if recession comes, Citi says

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Crude oil prices could sink to $65/bbl this year if an "increasingly likely" recession hits demand in the second half, Citi analysts said on Tuesday.

Citi said it sees the potential for oil prices to plunge to $65 by year-end and keep falling to $45 in another year, as supplies hold up but a global economic slowdown causes demand to decline, although it placed a 10% probability on this outcome.

The bank's base case, to which it assigns a 50% likelihood, is that Brent crude will drop to $85/bbl by the end of 2022.

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"Currently, our U.S. economists do not expect the U.S. to dip into a recession, but are also skeptical about the Fed's ability to engineer a modest slowdown, as the historical experience has been of hard rather than soft landings," according to the CIti analysts, led by Francesco Martoccia and Ed Morse.

"For oil, the historical evidence suggests that oil demand goes negative only in the worst global recessions... But oil prices fall in all recessions to roughly the marginal cost."

Citi's view stands in stark contrasts to J.P. Morgan's recent warning that crude prices could skyrocket to as high as $380/bbl in the event of deep cuts in Russian oil production.

Comments

[OverTheHorizon]

Or double on falling supplies and EU Ukraine crises.

[Paolo4Freedom]

Maybe, but I suspect Buffett doesn't think so.

[cenc]

either citi is upside down on their bets, or they are sitting on the largest secret oil reserve on the world. Like 20+ million barrels a day, large.

[craftbrewinfo]

@cenc CITI will be on the opposite trade to take your money with articles like this

[Prince Vinegar]

It's tough to make predictions, especially about the future - Yogi Berra

[LaOrtega]

And I COULD start dating Kendall Jenner, I COULD stop drinking...etc

[edaskew]

So, a recession could be brought on due to inflation and rate hikes designed to control inflation, much of which is due to an energy shortage and high energy prices, and now people are thinking energy is going to collapse? If energy prices come down, inflation comes down and rates come down. No recession, or at least no bad recession. Still the world is under supplied with oil and gas. Still the price has to stay pretty high either to destroy demand or to spur exploration and production. So, I'm not buying this bull(shee).

[coffeebreak]

@edaskew exactly, higher prices = demand destruction, so it will be ok long term, plus higher prices can stimulate financially the supply side.

[craftbrewinfo]

@edaskew well said

[Mark.c]

So we were already in recession Q1 and Q2 and stockpiles were drawing massively. So when they announce a recession after it happens then consumption drops off a cliff?

[r Negoro]

@Mark.c lol supply side matters more. This isnt a pandemic.

[Mark.c]

@r Negoro maybe Nato will back putin in a corner and he turns off the taps

[valuinvst]

So they are saying demand is going to fall way off in the next 6 months? Ok.

[1MyOpinion1]

I'll bet on CITI trying to hedge the market before it flies, just like they do with Silver...

[R_Mitchell]

I thought high energy prices and the inflation they bring was the main reason behind the recession predictions. But what do I know.

[Joe Brandon]

LGB DEMENTIA FOR THE WIN

[rpspumps]

And oil may go to $380 bbl, just who do you want to listen too?

[LongTruth]

@rpspumps you listen to everyone and apply probabilities to each scenario. Tail scenarios like $380 you apply a 0.5% chance, then apply 50% chance to $85 base scenario and 10% chance for $65-45 scenario as article states is reasonable. There are many possibilities out there. Some more likely than others. Be prepared for all scenarios and invest accordingly.

[Storm Blown]

@rpspumps Common Sense,Less Drilling,Russia out of it China opening up,Record Cash Flows E.V is a long way off

[Long Solo]

So it's either going to $65/barrel or $380/barrel.

Got it. Thanks analysts.

[tlapp]

@Long Solo Go big with the predictions, if they are right you brag about it. If you're wrong you go in hiding and hope everyone forgets.
My prediction is those predictions will be 0-2

[Taurus Eternal]

@Long Solo 😂

[nealyohara]

@Long Solo They have certainly covered all bases.

[AJoil1]

Those crocks want your options to go worthless, watch the July 15 open interest

[tlapp]

I'd bet against $65 even if we are already in a recession.

[AJoil1]

CITI can SU** my Sweaty Smelly Bal*s

[Jeff Pokorny]

hmmm. possible. never say never. but I'll take the overs.

[r Negoro]

Buffet just bought a lot of oxy tho ?

[Harry Polizzi]

@r Negoro

Are you trying to tell me that Buffet knows more than a Wall Street Anal yst?

Harry

[DBek]

@Harry Polizzi Not sure you're being sarcastic or not, but Buffet def knows more than a Wall Street analyst.

[coffeebreak]

@r Negoro yea...he has money to burn...so invest wisely.