Citi Lowers Oil Price Forecast, Hits Woodside and Karoon Earnings

Citi has trimmed its oil price forecast to $62/bbl in 2026, down from $65/bbl, and expects OPEC+ to unwind 1.6 million b/d of production cuts. This has led to lower core earnings forecasts for Woodside Energy (8% to $761 million) and Karoon Energy (17% to $122 million). Citi still sees Karoon as the "top value play" with potential near-term catalysts. Japanese stocks are lower due to a stronger yen and uncertainty over US tariffs, with the Nikkei down 0.1% at 45007.00.

OPEC+ is set to approve an additional increase in oil production by at least 137,000 barrels per day at its meeting on October 5, according to Reuters Reuters: OPEC+ plans to increase oil production quotas again in November^[1]. This decision follows a series of quota adjustments since April, which have seen the cartel raise production by over 2.5 million barrels per day. The move aims to regain market share and respond to U.S. President Donald Trump's pressure for lower oil prices.

The International Energy Agency (IEA) predicts record surpluses in global oil markets due to a slowdown in demand growth and increased supply. This prediction is supported by OPEC+'s recent production decisions, which have led to a significant reduction in the group's voluntary cuts from 5.85 million barrels per day at their peak.

Meanwhile, Citi has revised its oil price forecast for 2026 down to $62 per barrel from the previously projected $65 per barrel. This adjustment is partly due to the expected unwinding of 1.6 million barrels per day of production cuts by OPEC+. Consequently, Citi has lowered its core earnings forecasts for Woodside Energy Group Ltd (WDS) from 8% to $761 million and for Karoon Energy from 17% to $122 million Woodside Energy (WDS) Expected to Maintain up to 80% Interest in Louisiana LNG Project^[2].

The Japanese stock market has been affected by a stronger yen and uncertainty over U.S. tariffs, with the Nikkei index down 0.1% at 45,007.00. Despite these challenges, Citi still considers Karoon Energy as the "top value play" with potential near-term catalysts.