BAKU, Azerbaijan, July 5. Not enough oil in market will bring prices to a standstill, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY, and Global Head Strategy Risk at Berry Commodities told Trend.
Citigroup Inc. has warned that crude oil could collapse to $65 a barrel by the end of this year and slump to $45 by end-2023 if a demand-crippling recession hits. That outlook is based on an absence of any intervention by OPEC+ producers and a decline in oil investments, analysts including Francesco Martoccia and Ed Morse said in a report. Brent, the global crude benchmark, last traded near $113 a barrel.
“First of all, I don’t believe yet in this scenario. This is not yet reality at all. The opposite has a much higher chance of becoming the issue, not enough oil in market to bring prices to a standstill. A current recession is not yet reality, even with the high inflation and possible economic slowdown. To bring oil to these price levels we are talking about either a real very harsh recession, with high unemployment or total breakdown. No signs for that at all in market. Economic slowdown is a fact, but still we see some growth even. Unemployment is extremely low, even now constraining overall economic growth,” he said.
Widdershoven noted that Citigroup’s warning is a very bleak scenario, maybe instigated by some short in future markets by analysts of them, but not based on real market fundamentals.
“If this would happen, OPEC will not be doing a lot yet, as they also don’t see an economic crisis. A dramatic fall in prices, short-term, can however still be instigated by speculation, if more banks are going this way, and hedge funds are panicking or trying to make additional bucks of money, a price decline of this order could be a fact, but will be followed very soon by higher prices (so going long after being short!). Speculation could be the real driver, not yet economics. OPEC looks long-term, so will be reacting by doing nothing, it only will take some heat of their shoulders,” the expert concluded.
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