The global hydrocarbon market is bewildered. Currency strategists at Citi Research warn that Brent crude oil prices could drop to $60 per barrel by 2025 due to a significant market surplus. 

Recent disruptions in oil supplies from Libya and revisions to OPEC’s production increase plans briefly drove oil prices up, but the rally was short-lived. Brent crude remained in the $70-$72 range before posting modest losses.

The situation in Libya is a critical pain point in the global hydrocarbon market. A favorable resolution could take months. Citi Research anticipates a significant oversupply in the commodity market next year, which could lead to a further decline in oil prices. With this in mind, the strategists recommend selling Brent crude on a rebound to $80, expecting it to fall to $60 by 2025 due to potential substantial market surpluses.

In response to recent declines in hydrocarbon prices, OPEC+ has delayed the start of its planned production cut phase-out from October 2024 to December 2024, with the process now set to be completed by the end of 2025. 

Earlier, Bank of America's commodity research group lowered its Brent price forecast for the second half of 2024 to $75 per barrel from nearly $90, citing concerns over rising global oil inventories despite OPEC+'s delayed production increase. According to the bank, weaker demand growth, coupled with OPEC's record spare capacity exceeding 5 million barrels per day, is clouding the outlook for commodity prices.

Currently, Brent crude oil prices are moving from the upper border to the middle of the $60-$80 per barrel medium-term range faster than previously anticipated. Risk factors include overcapacity and subdued demand, which are dragging oil prices down. The high probability of geopolitical upheaval adds further pressure, the bank highlights.