Analysts at Wall Street bank Citigroup have predicted that oil prices will remain elevated in 2025 thanks to U.S. sanctions on oil exports, logistical challenges and strategic policy decisions by major producers and governments. Citigroup notes that Over 180 vessels, integral to transporting Russian crude, are now restricted. Two weks ago, the Biden administration issued sanctions against Russian crude, and targeted Surgutneftgas and Gazprom Neft, two firms that handle 25% of Russian oil exports. The two companies shipped an average of 970,000 bbls per day in 2024. Earlier, Citigroup issued a Brent crude average price target of $67 per barrel for 2025, well below current price at $79.10.

Other than the sanctions, analysts at Standard Chartered have argued that there are other reasons for the strength in prompt markets: OPEC+ has largely stuck to its target quotas; non-weather-related demand is more robust than consensus expected; and non-OPEC supply growth is coming in lower-than-expected. In short, StanChart says the market strength is likely to persist after weather patterns return to seasonal averages. According to StanChart, the decision by OPEC+ to delay the planned output increase by three months to April 2025, and extend the full unwind of production cuts by a year until the end of 2026 will ensure that oil markets are not oversupplied in 2025.

According to StanChart, by both delaying the start of voluntary cut unwinds and flattening the slope of the m/m increases, the organization has effectively removed a large amount of oil from the 2025 plan. The analysts point out that the previous plan for voluntary cut unwinds and the UAE target increase would have added a cumulative 496.3 mb to the market in 2025; however, the new schedules will now add just 191.3 mb, good for a 836 thousand barrels per day (kb/d) cut for the whole year. Further, StanChart’s supply-demand model implies that output can increase under the new schedules without causing a global inventory build, even without consideration of compensation by three OPEC+ members.

By Alex Kimani for Oilprice.com

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