Brent crude oil is overvalued and should fall significantly as demand drops and recession fears loom, according to Citi’s global head of commodity research.
“I’d say it’s more in the $70 range than it is in the $120 range,” Ed Morse said in an interview with Bloomberg on Tuesday. “If you look at the fair value for oil, look at the flowing curve. It’s exaggerated.”
Brent crude has surged more than 50% year to date after Russia’s invasion of Ukraine and Western sanctions on Moscow sent energy prices soaring.
On Tuesday, oil jumped to a two-month high of more than $123 a barrel after the European Union agreed to ban most Russian oil imports as part of its sixth round of sanctions.
Morse said Citi’s demand expectations for oil had dropped sharply this year as fears of a recession took hold. The Wall Street giant cut its demand expectations by 1.4 million barrels.
“We had at the beginning of the year expected there would be around 3.6 million barrels a day of demand increase year over year. We’re now down to 2.2 million barrels a day,” he said.
“That’s a big difference if you are pulling on a refining system that is under duress,” Morse added. “A world staring at a recession is not a world with robust demand growth for diesel.”
Recession concerns around the world have mounted recently. The World Bank warned that the Russia-Ukraine war has caused commodity prices to rise to such an extent that a global recession may now be inevitable.
“As we look at the global GDP … it’s hard right now to see how we avoid a recession,” World Bank President David Malpass told the US Chamber of Commerce last week, according to a Reuters report. “The idea of energy prices doubling is enough to trigger a recession by itself.”
“On Tuesday, oil jumped to a two-month high of more than $123 a barrel after the European Union agreed to ban most Russian oil imports as part of its sixth round of sanctions.“
You know, lately it kinda makes me wonder….Are the elite sanctioning Russia or are they really sanctioning us? Who’s really hurting more in this long drawn out escapade?
Us
The more I’m seeing it, the more it seems that the elite are simultaneously sanctioning Russia and the world while also trying regain control of the oil resources (as the exact spots in Ukraine that Russia invaded and are holding are coincidentally the exact same spots where Chevron, Shell and Exxon had oil contracts in that got taken over by Russia). In addition, they are also using the so called crisis as an excuse for them to promote and accomplish their goal of trying to get rid of oil dependency and achieve their clean air climate plan.
However, since Lithium batteries are hard to come by, electric cars causing more problems than good and the lack of renewable alternative developments, it seems their transitional plan is falling apart.