Citi analysts warn of geopolitical tensions and extreme weather events posing risks to oil prices in the near term.
Conflicts in the Middle East and Hurricane Beryl are cited as examples. Despite these factors currently supporting prices in the $80s, Citi anticipates a potential softening later in the year.
"Underlying physical market strength is expected to weaken," states Citi. While demand signals show some positive signs like increased gasoline demand in the US, overall demand remains lower compared to last year.
Citi maintains a price target of $82 per barrel for the next 0-3 months but revises its 6-12 month target to $72 per barrel, citing a possible supply surplus post-summer.
The focus in physical markets is currently on pre-summer contracts, but Citi warns that indicators may shift towards a softening trend in September deliveries. This, combined with the hurricane season, adds further uncertainty.
Financial positioning is described as "fairly clean" overall, with a long position in WTI futures noted by Citi. However, this positioning could shift to a more neutral or even long stance if short positions are concentrated in later contracts, reflecting a bearish outlook for 2025, they conclude.
Discover the latest insights from Citi analysts on the risks facing oil prices due to geopolitical tensions and extreme weather events. Learn about the factors supporting current prices in the $80s and why Citi predicts a potential softening later in the year.
Key Points:
- Geopolitical tensions and extreme weather events pose risks to oil prices
- Citi maintains a price target of $82 per barrel for 0-3 months
- 6-12 month target revised to $72 per barrel due to potential supply glut
- Financial positioning remains fairly clean overall, with a long position in WTI futures
Stay informed on the shifting dynamics of the oil market and how it could impact your financial decisions. Understanding these insights can help you navigate potential changes in oil prices and make informed investment choices.