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Citi has a message for oil bulls: $60 oil to return by 2021

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By Sharon Cho

Citigroup Inc. has a message to cheer up despairing oil bulls: costs will get again to $60 a barrel earlier than the top of 2021.

“We’re bullish undoubtedly,” Ed Morse, world head of commodities analysis at Citi, stated in an interview throughout the S&P International Platts Asia Pacific Petroleum Convention. “In our base case, costs go up as a result of the market balances” and gigantic inventories are drawn down, he stated.

The speed at which these stockpiles are shrinking seems to have slowed in current weeks because the coronavirus proved stubbornly persistent and the OPEC+ alliance returned barrels to the market. That’s pushed world benchmark Brent crude down round 12 per cent to this point this month.

ReboundBloomberg

It’s going to take till late 2021 for world oil consumption to return to the 2019 stage of 101 million barrels a day due to progress in economic system, Morse stated. Citi sees world benchmark Brent crude, which is at the moment trading close to $40 a barrel, averaging round $55 in 2021 earlier than getting again to the $60 mark by the top of the 12 months. West Texas Intermediate will get well to $58 by then.

Commodity trading big Trafigura Group, nonetheless, expects crude stockpiles to improve by the top of this 12 months on weak demand, with the market to look “worse in a couple of months from now.” That compares with Citi’s prediction for Brent oil to climb and common $48 a barrel throughout the fourth quarter.

For Citi, petrochemical feedstock and gasoline would be the largest progress drivers for fuels, whereas the consumption of jet gas is predicted to stage a comeback in 2024-2025, Morse stated.

Brent’s transfer again above $60 might be short-lived, nonetheless, as increased costs will lead to a rebound in American manufacturing, Morse stated. There are additionally a number of unknown elements — together with whether or not Iranian output will come again in a important method — that would have an effect on the market, he stated.

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