Citigroup says oil prices could tumble to $65 by the end of the year if a recession whacks demand

Citigroup says oil prices could tumble to $65 by the end of the year if a recession whacks demand
Oil prices have jumped almost 50% this year.Zuzana Gogova/Getty Images
  • Oil prices could crater to $65 a barrel by the end of the year if an "increasingly likely" recession takes hold, Citi has said.
  • It said even without a recession, it expects prices to cool to $85 a barrel by then, from around $112 on Tuesday.

Oil prices could tumble to $65 a barrel by the end of the year if an "increasingly likely" recession hits the global economy, analysts at Citi have said.

Crude prices have rocketed roughly 50% this year due to Russia's invasion of Ukraine and a post-pandemic rebound in demand, which has driven up inflation and weighed on global growth.

But Citi analysts, led by Francesco Martoccia, said in a note Tuesday that they expect oil prices to fall by the end of 2022 as supplies hold up but a global economic slowdown causes demand to cool.

Martoccia and colleagues predicted that Russian exports would increase by the end of the year as India and China snap up the country's oil. Many analysts expect exports to fall due to sanctions on Moscow.

If global economic growth slows toward recessionary levels, prices could plunge to $65 a barrel by the end of 2022 and keep falling to $45 a year after that, Citi said. It put a 10% probability on this outcome.


The investment bank's base case — which it says has a 50% probability of happening — is that Brent crude will fall to $85 a barrel by the year's end, down around 24% from Tuesday's price of $112.

Fears are growing that some of the world's biggest economies, including the US, will tumble into a recession as central banks such as the Federal Reserve raise borrowing costs in an effort to stamp down on inflation.

"Currently, our US economists do not expect the US to dip into a recession, but are also skeptical about the Fed's ability to engineer a modest slowdown, as the historical experience has been of hard rather than soft landings," Martoccia and colleagues wrote. They called a global recession "increasingly likely."

When recessions hit, unemployment rises and corporate bankruptcies increase, slashing the demand for energy, Citi said. Surpluses of energy typically build up, forcing sellers to cut prices sharply to sell their product.

Yet Citi also said European sanctions on Russia, such as the EU's plan to sharply reduce imports from the country, could increase prices. The bank thinks there's a 30% chance oil prices will rise to $120 by the end of the year.


Uncertainty about the oil market is high, with forecasts varying. JPMorgan over the weekend said plans to cap Russian oil prices, floated by the G7 last week, could cause Russia to slash its production sharply. That could drive prices as high as $280 a barrel, in a worst-case scenario, it said.

Overall, analysts expect Brent crude to end the year at around $101 a barrel, according to estimates compiled by Bloomberg.