Oil prices continued to decline on Wednesday, with forecasts suggesting an average of around $60 per barrel next year, and possibly even dipping to around $50, according to Citi.
In late afternoon trading in London, Brent front-month futures fell 1.3% to $72.81 per barrel, while West Texas Intermediate also dropped 1.3% to $69.41.
Citi analysts predict that Brent could average about $60 per barrel in 2025 if OPEC+ does not extend its current output cuts indefinitely, coupled with anticipated reduced demand. Should Brent prices fall into the $60s, they could drop even further to $50 per barrel, according to their analysis.
Despite falling from $90 a year ago, and amid ongoing tensions in the Middle East and Ukraine, Citi analysts believe the market now acknowledges that geopolitical issues do not necessarily lead to reduced production or transit disruptions.
In a separate report, Goldman Sachs points out that the increasing use of AI by energy companies could drive oil prices lower over the next decade. AI is expected to cut shale production costs by up to 30%, potentially lowering prices by $5 per barrel and increasing oil reserves by 8-20%. Analysts estimate that AI could reduce the costs of drilling new shale wells by 30% and potentially expand the recoverable resource base.
While AI may slightly increase oil demand by 0.7 million barrels per day, this effect is minimal compared to the negative impacts from electric vehicles (EVs) and decreasing natural gas prices. Overall, Goldman Sachs anticipates that AI will have a modest net negative impact on oil prices in the medium to long term.
