While Saudi Arabia has decided to unilaterally cut its oil production by a million barrels per day (bpd), the multinational investment bank Citigroup believes it is unlikely to lead to oil prices soaring towards $90 per barrel.
Saudi Arabia’s voluntary cut followed a reportedly fractious meeting of the OPEC+ group, which ultimately decided to keep production at current levels, but a note from the bank, as reported by Reuters, said:
“The likelihood that Saudi Arabia would tackle this on its own on a sustained basis is quite low.”
Nevertheless, Citi agrees with other banks in that the second half of this year will see a supply deficit, but it disputes that this will lead to substantial price increases. Indeed, it thinks there could be a greater chance of lower prices due to a sluggish recovery in demand in China, possible recessions in Europe and North America, and increased supply from sources outside the OPEC+ group. For example, ExxonMobil, the maker of the Mobil DTE hydraulic oil, is gradually bringing online some of its projects offshore of Guyana.
Soni Kumari and Daniel Hynes, who are analysts at ANZ, disagree and predict a price of $100 per barrel for Brent crude this year, saying:
“Investors are likely to add bullish bets, comfortable that Saudi Arabia and OPEC will provide a backstop should the market hit any hurdles.”
Goldman Sachs has also made a similar forecast of $95 per barrel for the last month of this year based on recent events.