The oil may sputter; continue to recommend selling power: Read By Investing.com

Investing.com — Analysts at Citi Research in a note dated Wednesday pointed to a potential near-term return of prices to $80 per barrel for . However, the investment bank maintains its long-term bearish outlook, forecasting an average Brent price of $60/bbl in 2025.

Reasons for potential near-term rebound

• Tight Oil Scales: Citi points out that global oil markets are currently facing a shortfall of around 1.5-2 million barrels per day (bpd), primarily due to strong refining activity and robust demand in August.

• Geopolitical risks: Heightened tensions in the Middle East and North Africa, along with the ongoing hurricane season, could introduce supply disruptions, providing temporary support to oil prices.

• Sub-positioned speculators: The lightly managed money position suggests near-term upside potential as investors rebalance their portfolios.

Citi’s long-term bearish outlook

Despite the possibility of a near-term price rally, Citi remains firmly in its bearish position on oil over the next 12-18 months. The bank cites several factors that support this view:

• Decrease in demand: The global economic slowdown and increasing adoption of electric vehicles in China are expected to dampen oil demand growth.

• Over capacity: OPEC+ countries have significant spare capacity that could be deployed to offset potential supply disruptions and prevent price spikes.

• Non-OPEC Supply Increase: Robust oil production from non-OPEC countries is expected to further influence prices.

Focus on Kharg Island

Citi highlights the importance of Kharg Island, Iran’s main oil export terminal. The island’s vulnerability to attack and its historical role in disrupting oil exports highlight the potential for geopolitical tensions to escalate and affect oil prices.

Inventory data

• Global crude oil stocks: It fell 2.2 million barrels last week, with the US leading the charge.

• US Crude Oil Stocks: It fell 3.7 million barrels, defying expectations for a smaller decline.

• US Gasoline Inventories: It rose by 1.3 million barrels, beating forecasts.

• US Distillates Inventories: It rose by 0.9 million barrels, beating expectations.