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October 22, 2019

Citi expects oil price to reach 70 USD per barrel by year-end

OilInvestment bank Citigroup maintains its bullish attitude for crude oil and copper in 2017. According to the traders from the bank, the prices of the European benchmark Brent oil will rise to about 70 USD per barrel and copper to 7,000 USD per ton at the end of this year. For the both raw materials the expectations of higher prices are due to speed rebalancing within the year.

“In addition, the investors have commodities in their portfolio, tring to diversify the fact that key raw materials are no longer strong positive or negative correlation with stocks, bonds and the US dollar”, says the memo of Citigroup sent to its customers.

The good assessment of Citi, at least with regard to raw materials, is good news for hedge funds and private asset managers, who bet that oil will become more expensive. Last week, they increased their net long positions on the Brent oil to the highest level since 2011.

Citi raises short-term forecast for the price of Brenta by 5 USD to 55 USD per barrel in the first quarter of 2017 and by 2 USD to 56 USD per barrel in the second quarter, partly because investors maintain bullish sentiment. Overall the bank expects Brent to move in a range between 60 and 65 USD per barrel this year.

As for US light crude, the analysts of Citi expect the average price of 53 USD per barrel in the first quarter, 54 USD per barrel in the second, 57 USD per barrel in the third and 62 USD per barrel by the end of 2017.

“The case of copper is more uncertain because the industrial metal is associated with long-term dynamics of supply, which includes not raising capital, but the lack of pipelines or ores are richer in copper”, says the memo of Citi.

Commenting on February 19, the bank indicates that prices may rise above 8,000 USD per tonne by the end of 2020, because of potentially higher demand from China and influence the choice of Donald Trump for president of the United States.

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