Barclays lowered its Brent price forecasts on Tuesday by $8 per barrel for 2022 and 2023, as it expects a large surplus of crude oil over the near-term due to "resilient" Russian supplies.
The British bank now sees Brent crude averaging $103 this year and next, and U.S. West Texas Intermediate (WTI) to average $99 for both years.
Benchmark Brent crude futures were trading around $94 a barrel on Tuesday, while WTI futures were slightly below $89.
The recent move lower in prices is primarily a timing issue, as resilient Russian supplies before the European Union's sanctions kick in later this year have coincided with elevated concerns of a broader slowdown, the bank said in a note.
EU leaders in late-May agreed to impose an embargo on Russian crude oil imports that will take full effect by the end of the year, and will ban all Russian refined products two months later.
Barclays expects Russian oil output to decline 1.5 million barrels per day compared with the pre-war level once the EU sanctions on imports and insurance activities kick in.
Barclays also noted that the actual downside to the price forecast could be limited by a potential OPEC+ response to a possible demand slowdown next year from a mild recession.
"We think the threshold for such intervention would be lower than in 2020 because of a potential exemption from supply cuts for Russia due to sanctions and the lack of price response from U.S. producers."
The Organization of the Petroleum Exporting Countries and its allies, led by Russia, or OPEC+, is set to raise its output target by a tiny 100,000 bpd from September.