Possible cause for future oil price crash

Crude oil could fall to $65 a 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 only turns negative in the worst of global recessions.” the bank’s analysts said in a note seen by Bloomberg. “But the price of oil falls to about marginal cost in all recessions,” they stated.

According to the report, the outlook is based on a lack of any intervention from OPEC+ producers and a drop in oil investment. It compared the current energy market with the crises of the 1970s.

Oil prices rose on Wednesday with US West Texas Intermediate (WTI) trading above $100 a barrel. Global benchmark Brent rose 1% to above $104 a barrel.

A potential production disruption in Norway, where offshore workers went on strike, has contributed to growing global supply concerns. The strike is expected to cut oil and gas production by 89,000 barrels of oil equivalent per day. Elsewhere, Saudi Arabia raised crude oil prices to near record levels for Asian buyers in August as supply tightens.