Oil’s ‘last hurrah’ is coming, Citi says in bearish outlook for global crude prices

Oil futures rose on Wednesday despite an unexpected 3.7 million barrel increase in US crude inventories and the International Energy Agency's forecast of a “spectacular” oil glut by the end of the decade.

The International Energy Agency expects oil demand growth to peak by 2029 It will begin to shrink next year, reaching 105.4 million barrels per day in 2030 as the rollout of clean energy technologies accelerates, while oil production capacity is expected to rise to 113.8 million barrels per day, driven by producers in the United States and the Americas.

“This will lead to levels of spare capacity that were only seen at the height of the coronavirus lockdowns in 2020,” the IEA warned. “Such a huge oil production reserve could lead to a low oil price environment, posing difficult challenges for producers in the US shale sector and the OPEC+ bloc.”

The International Energy Agency's confirmation of declining oil demand growth and rising supplies came as a surprise Negative for oil But “most traders are taking this with caution, as global refinery demand is still very present, and the EV growth craze in electric vehicles appears to be slowing,” BOK Financial's Dennis Kessler said Wednesday, according to Dow Jones.

Meanwhile, US crude oil inventories recorded a surprise increase last week, rising by 3.7 million barrels to 459.7 million barrels, compared to expectations for a decline of 1.2 million barrels, and domestic gasoline inventories rose more than expected, rising by 2.6 million barrels to 233.5 million barrels. Drums.

Crude oil prices received support from a lower-than-estimated US inflation reading for May, while the Federal Reserve left interest rates unchanged as expected, but expected to cut interest rates only once this year.

Nymex crude (CL1:COM) for July delivery was flat +0.7% to $78.50 per barrel, and August Brent crude (CO1:COM) closed as soon as +0.8% To $82.60 a barrel, which is the fifth gain for both benchmarks over the past six sessions.

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City analysts draw A A bleak picture for the oil market In a new report on Wednesday, he forecast a drop to $60 a barrel for Brent crude a year from now.

Citi believes that global oil stocks are moving towards a “large surplus”, even if OPEC and its allies extend production cuts until the end of next year, and if the organization follows through on its recent plan to cancel some cuts, the bank expects that a “very large surplus” will follow.

The surface of oil prices in Citi is Less than all of its peersBrent crude is expected to fall to $74 per barrel in the fourth quarter, with 2025 opening at $65 per barrel and then slipping to $60 in the second and third quarters, before ending next year at $55 per barrel; West Texas Intermediate crude oil price forecasts are about $4 per barrel lower.

The bank believes copper is the hottest commodity to hold in 2024-25, expects prices to rise to $12,000 a tonne next year, and suggests investors buy into the metal while shorting crude oil.