Optimistic Citi predicts oil at $60 per barrel in 2021

Citigroup CEO Mike Corbat forecast an ‘uneven’ economic return. (Supplied)
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Updated 03 July 2020

Optimistic Citi predicts oil at $60 per barrel in 2021

DUBAI: The price of Brent crude is forecast to reach $60 per barrel by analysts at Citi, the big US bank, as global economic demand recovers and high stock levels are used up.
Max Layton, Citi’s head of regional commodity research, said that the $60 figure was made more likely by a “collapse” in capital expenditure in the oil industry. “No new oil projects are incentivized at $40,” he told the bank’s global media summit.
The Citi forecast is among the most optimistic for oil prices as they recover from the most volatile period in the industry’s history. Brent began the year above $60, but fell below $20 in early April. It was trading Thursday above $42 per barrel.
Layton also ruled out the possibility of a new “price war” in oil markets while prices remained around present levels. “At current price levels and with the future structure of the industry we are not anticipating further price wars.
“But at $55-$60 that could be the case. Higher prices increase the possibility of Russia breaking away from the Opec+ deal.” Citi’s longer term forecast for the oil price remained at the lower end of a range from $45-$60, he added.
Grant Carson, head of Citi’s business in several Central Asian countries, said that even with oil at $20 per barrel, Russia could cover its national budget for more than two years. Lower oil prices could speed diversification away from energy sector dependency, he added.
Atiq Rehman, head of Citi emerging markets, said that Gulf Cooperation Council countries had low debt-to-GDP ratios and high levels of sovereign wealth, and had the capacity to deal with the challenges presented by relatively low oil prices.
“They have big public sectors where the governments own a lot of assets,” he said.
Mike Corbat, Citigroup CEO, said the economic recovery from the pandemic lockdowns would be uneven, and would depend to a great extent on the response from governments. “There have been some truly extraordinary actions by financial authorities around the world, not least the US.”
He said that US financial markets had responded and were “encouraged by the resilience” of government policy.

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Oil climbs on positive China data, hopes for US stimulus package

Updated 11 August 2020

Oil climbs on positive China data, hopes for US stimulus package

  • Iraq to deepen supply cuts in August and September; China’s factory deflation slows in July

LONDON: Oil rose on Monday, supported by an improvement in Chinese factory data, rising energy demand and hopes for an agreement in the United States on more coronavirus-related economic stimulus.

Brent crude rose 75 cents, or 1.7. percent, to $45.15 a barrel, and West Texas Intermediate (WTI) US crude was up 94 cents, or 2.3 percent, to $41.16 a barrel.

Saudi Arabian Aramco CEO Amin Nasser said on Sunday that he sees oil demand rebounding in Asia as economies gradually open up.

China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed back toward pre-coronavirus levels, adding to signs of recovery in the world’s second-largest economy.

“With oil demand still slowly grinding higher, and oil supply in check due to the OPEC+ production cut deal and prices too low to incentivise strong production growth in the United States, the oil market remains undersupplied,” UBS analyst Giovanni Staunovo said.

Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.

The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and allies, a grouping known as OPEC+.

“This would send out a strong signal to the oil market on various levels. That said, this would also require the international companies operating in Iraq to join in with the cuts,” Commerzbank analyst Eugen Weinberg said.

Prices also found some support after US President Donald Trump said US House Speaker Nancy Pelosi and Chuck Schumer, the top Democrat in the Senate, wanted to meet with him to make a deal on coronavirus-related economic relief.

The talks between Democrats and members of Republican Trump’s administration broke down last week.

“The longer this drags on, the worse it is for the demand scenario,” said Michael McCarthy, market strategist at CMC Markets and Stockbroking.

However, uncertainty over rising tensions between the United States and China put some pressure on prices. Trump signed two executive orders banning WeChat and TikTok in 45 days’ time while announcing sanctions on Chinese and Hong Kong officials.

Markets will now keep an eye on a China-US meeting on trade scheduled for this weekend.