Citi Sees Oil Prices Dropping to $60 Under Trump

Citi analysts have forecast that Brent crude would average $60 per barrel next year driven lower by the energy policies of the incoming U.S. administration.

The bank noted import tariffs and higher oil production as the driving factors behind this forecast for oil prices.

Analysts also suggested Trump may use his “influence on OPEC+” to convince the group to bring supply back, including production and oil from floating storage. They also said Trump’s presidency could lead to a decline in geopolitical tensions, further contributing to lower prices.

At the same time, energy policies at home could see stronger government support for oil and gas investments, potentially boosting production, Citi analysts also wrote, as quoted by Reuters. “Still, despite the more supportive oil and gas agenda, its immediate impact on physical oil markets is likely to be limited,” they said.

“Conceptually, the impact of a potential second Trump term on oil prices is ambiguous, with some short-term downside risk to Iran oil supply … and thus upside price risk,” Goldman Sachs analysts wrote in a note earlier in the week, before the elections. They did add, however, that there was downside risk to demand and prices stemming from Trump’s stated trade policies.

There is also the question of prices and production growth motivation because pro-growth energy policies may well lead to more production but they would also depress prices and that, in turn, would lead to lower production as has happened since the oil and gas industry came into being.

“If the Trump administration opens up federal leases for oil and gas, Federal lands would get 25% per barrel of revenues. You will have a lot of trouble finding an oil company that can make money at $52.50 per barrel with what they have left from a $70 barrel,” Smead Capital president Cole Smead told CNBC.