Citigroup Inc lowered its base case price outlook for 2015 and 2016 crude oil prices citing weak market fundamentals, including an increased supply from Opec and challenging demand growth in China and emerging markets. "Huge crude and product inventories are likely to bloat further during refinery maintenance season and expected production growth out of Iran and Iraq should exacerbate this further," analysts with the US bank said in a note Friday.
Citi lowered its base case Brent price forecasts to $54 per barrel for 2015 and $53 in 2016 from $58 and $63, respectively. It also lowered its 2015 and 2016 West Texas Intermediate (WTI) price forecasts to $48 per barrel from its prior view of $53 and $56, respectively.
Citi said it assigns a probability of 55 percent to its base case forecasts. "It is now clear that neither a V- nor a U-shaped oil price recovery is in order," the investment bank said. Geopolitics are putting a heavy ceiling on prices, the bank's analysts said, citing Saudi Arabia raising the stakes in its effort to gain market share, and stabilizing energy sector in Iraq and supply from Iran.
"(Increasing) demand, disrupted supply, and falling marginal production (including US shale) all seem incapable of lifting prices significantly back to earlier trading ranges," the bank said. US crude oil steadied on Friday after falling to its lowest in almost 6-1/2 years as huge stockpiles and refinery shutdowns heightened concerns about global oversupply. In the past month, Brent has fallen about 19 percent and WTI has dropped about 26 percent.
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