“For oil, the historical evidence suggests that oil demand goes negative only in the worst global recessions,” Citi analysts wrote.
A recession could demolish global fuel demand.Oil prices may tumble to $65 per barrel by the end of this year and to as low as $45 a barrel by the end of 2023 if the world enters a recession that would crash fuel demand, according to Citigroup., that the assumptions for this forecast include a global recession, a lack of intervention by OPEC+ or some of its members to boost supply, and a drop in oil investments.
“For oil, the historical evidence suggests that oil demand goes negative only in the worst global recessions,” Citi analysts including Ed Morse and Francesco Martoccia wrote in the note. “But oil prices fall in all recessions to roughly the marginal cost,” the bank says, as carried by Bloomberg.While warning that oil could crumble in case of a recession, Citi’s analysts currently do not expect the U.S. economy to slide into a recession.
Fears of a recession have dragged oil prices down in recent weeks, and they saw their first monthly drop in June for the first time in eight months after the market started fretting about the aggressive interest rate hikes from central banks, including the Fed, as they try to tame the steepest rise in consumer prices in developed economies for four decades.
Citi’s global head of commodity research, Ed Morse, has been bearish on oil for months, and said in June that crude oil
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