Top global crude exporter Saudi Arabia’s pledge to deepen output cuts is unlikely to underpin a sustainable price increase into the high $80s-low $90s, Citi said in a note on Tuesday, even as other brokerages signalled a bigger deficit in the second half.
Weaker demand and stronger non-OPEC supply by year end, potential recessions in the U.S. and Europe, and lower growth in China could push prices lower rather than higher this year and in 2024, analysts at Citi said.
“The likelihood that Saudi Arabia would tackle this on its own on a sustained basis is quite low,” Citi said.
Prices are expected to be range-bound, the analysts added, with Brent averaging $81 a barrel through the year.
Oil prices retreated on Tuesday, with the benchmark Brent crude trading around $75 a barrel, as worries over global economic growth doused a rally following Saudi Arabia’s output cut.
HSBC also maintained its Brent price forecast of $93.5 a barrel for the second half of the year, predicting negative macroeconomic factors would offset some of the support from the cuts.
However, UBS and Barclays were slightly more upbeat. UBS analysts forecast Brent prices at $95 a barrel by end-2023 with a supply deficit seen rising above 2 million bpd.
They added the global market balance is likely to remain in a “meaningful deficit” following the broader OPEC+ agreement to extend voluntary cuts to end-2024.
Barclays expected the voluntary reduction by Saudi Arabia to slightly boost the deficit in the second half of the year.
Other analysts have also said a global shortfall in supply is set to deepen in the third quarter following the cuts and could push Brent towards $100 a barrel by year end.