Saudi cuts unlikely to lift oil prices to high $80s-low $90s, Citi says

Saudi cuts unlikely to lift oil prices to high $80s-low $90s, Citi says

Top crude exporter Saudi Arabia's pledge to deepen output cuts is unlikely to underpin a sustainable price increase into the high $80s-low $90s, Citi said in a note on Tuesday, even as other brokerages signalled a bigger deficit in the second half.

Weaker demand, stronger non-OPEC supply by year-end, potential recessions in the U.S. and Europe, and lower growth in China could push prices lower this year and in 2024, Citi analysts said.

"The likelihood that Saudi Arabia would tackle this on its own on a sustained basis is quite low," Citi said.

Citi forecast Brent to be range-bound, averaging $81 a barrel this year.

Oil prices retreated, with Brent crude trading around $75 a barrel, as worries over global growth doused a rally following Saudi Arabia's announcement.

"A back-of-envelope calculation shows the need from a Saudi perspective for a ten-dollar rally in crude oil for the one million barrels cut to be revenue neutral," said Saxo Bank strategist Ole Hansen.

For now, the main oil price driver continues to be concerns about global growth and demand, not only in China, but also the U.S. and other key consumers, Hansen added.

HSBC also maintained its Brent forecast of $93.5 a barrel for the second half of 2023,