Oil prices set to soar this summer, plunge in 2025: Citi analysts

Citi analysts assume oil prices will peak this summer before crashing next year.

"We essentially think ... global inventories will be building a lot next year," Citi's global energy strategist Eric Lee told Yahoo Finance this week. West Texas Intermediate crude CL=F rose less than a per cent on Thursday to remain nearly at $82 per barrel, while Brent BZ=F, the international benchmark price, advanced more than a per cent to just over $85 per barrel.

"We do think that there is a bit of a tight stretch [with supply] through the summer, so we do see prices staying in the low- to mid-80s for a little longer. But as we're looking through the second half of the year into 2025, we really see markets getting a lot weightier," said Lee.

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Lee expects Brent crude to begin its slide into the $70 range later this year and into the $60 range in 2025. The forecast comes amid recent signals from what's known as oil alliance OPEC+ that it would start phasing out voluntary production cuts, a move curated in response to member countries' hues and cries about losing market share.

"In our base case, we have 1.4 million barrels [of] global oil stock building next year after a roughly balanced market this year," said Lee. "I think when the market sees that, that is bearish for the price."

In addition, he sees oil demand growth slowing further out because of the acceleration in electric vehicle adoption. "Oil demand can grow at a slower and slower rate relative to GDP and in fact peak before the end of this decade," Lee said.

Although Citi is known for relatively bearish calls on crude, other analysts also predict a price downtrend next year. JPMorgan strategists call for Brent to average $75 per barrel in 2025, down from $83 this year.

"Global oil demand growth will likely decelerate from 1.4 million barrels per day this year to 1 million barrels per day in 2025 as the last phase of the post-pandemic rebound dissipates and advancing energy efficiencies and an expanding electric vehicle fleet gain ground," Natasha Kaneva, head of global commodities strategy at JPMorgan, said in a recent note.

A consensus cited by Goldman Sachs, specifically, views Brent averaging $84 per barrel this year on the back of a supply squeeze over the summer while saying that the firm expects the international benchmark to average $82 per barrel by 2025.

These oil price outlooks depict a complicated interaction of the dynamics of supply, inventory levels, and especially fast-changing patterns in demand. Should OPEC+ alter its production strategy and see an accelerated pace in terms of the global path to electric vehicles, as previously mentioned, the watch for market participants will be these evolving events shaping future price trends. A potential drop of such nature may hit a reckoning on energy markets and the economy at large, everything from consumer prices to geopolitics.