American company, Citigroup, has released a crude oil forecast that contradicts that of Goldman Sachs, with the former stating that the commodity will fall to $65 by the end of this year.
This means the price of crude oil will fall by -56.22% within the next one year and six months, when compared to the current cost of $102.8 per barrel, dropping $57.8 during the period.
According to Citigroup, the dip in price will be driven by dwindling oil investments and global recession, considering demands for the product usually falls during the period, negatively affecting the cost of oil in the global market.
The bank also listed lack of raising supply by the Organization of Petroleum Exporting Countries and its allies (OPEC+) to tame the out of control crude oil price.
It was gathered that before this year ends, the price will hit a downward trend, settling at about $65 per barrel, but will close 2023 at $45. “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.” Citigroup’s analysts, Francesco Martoccia and Ed Morse, said in the firm’s new notice to the market regarding the forecast for this year and next.
Meanwhile, Goldman Sachs had forecasted that crude oil would sell at $140 between the last six months, stating that while the price was “tremendously high right now”, it presents an opportunity for buyers to invest, as the price still has a long way up.
According to Goldman Sachs’ Global Head of Commodities Research, Jeffrey Currie, “Ultimately, remember, the only way of solving these problems is to increase investment, so we stick to our guns of oil prices moving into the summer up into $140 a barrel range given record-level cracks, and that’s going to be a lot more upside to product prices.’’
With Citigroup and Goldman Sachs projecting different oil prices, the former expressed that the commodity is currently overvalued in the market, and should be worth $70, not selling above $100.
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