Possible cause of future oil price crash named

Crude oil could plunge to $65 per barrel this year and fall further to $45 by the end of 2023 if a global recession cripples demand, Citigroup warned on Tuesday.

“For oil, the historical evidence suggests that oil demand goes negative only in the worst global recessions,” the bank’s analysts said in a note, seen by Bloomberg. “But oil prices fall in all recessions to roughly the marginal cost,” they indicated.

The outlook is based on an absence of any intervention by OPEC+ producers and a decline in oil investments, according to the report. It has compared the current energy market with the crises of the 1970s.

Oil prices were gaining on Wednesday, with US West Texas Intermediate (WTI) trading above $100 per barrel. The global benchmark Brent was up 1% to over $104 per barrel.

A potential output disruption in Norway, where offshore workers began a strike, has added to growing global supply concerns. The strike is expected to reduce oil and gas output by 89,000 barrels of oil equivalent per day. Elsewhere, Saudi Arabia has raised August crude oil prices for Asian buyers to near record levels amid tightening supply

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