The price of oil has been increasing recently, but Citigroup thinks the price will continue to fall in the long term. In a report released Feb. 9, the financial giant predicted crude oil will fall to as low as $20 a barrel.
The past few weeks have seen global declines in oil spending, which has driven up prices to more than $52 a barrel as of Feb. 9. But as Citigroup points out, the market is oversupplied.
U.S. oil production continues to rise and with Brazil and Russia pumping oil at record levels, the market has been forced to adjust. Middle East oil tycoons, like Iran and Saudi Arabia, have been cutting oil prices to Asia to maintain their share of the market. Even OPEC has lost some of its ability to control the market.
"It looks exceedingly unlikely for OPEC to return to its old way of doing business," the report said. “While many analysts have seen in past market crises 'the end of OPEC,' this time around might well be different."
It is also unlikely oil production will slow down. While many companies have pulled rigs and cut billions in planned spending, Bloomberg says the impact on production wont been seen for some time.
Many continue to say that current prices are not sustainable in the long run, fueling the prediction that prices will continue to fall. Citigroup is predicting a “disinvestment from oil” that would skyrocket prices to $75 a barrel in the fourth quarter. For now, prices are averaging $54 a barrel for 2015.