Oil Prices Near $75, But Is It Time to Buy? Citi Research Thinks So
Oil prices have seen a slight decline recently, hovering around $75 per barrel. Despite easing geopolitical tensions, Citi Research believes this dip could be a short-term buying opportunity. The brokerage points out several factors that could potentially lead to a rebound in oil prices, with a target of reaching the $80s per barrel.
Geopolitical developments, especially in Gaza, have contributed to the recent price drop, as a potential cease-fire reduces immediate risks. Additionally, China’s economic slowdown, reflected in weakened industrial production, has led to a more cautious outlook on oil demand.
While these factors have reduced the geopolitical risk premium for oil, Citi Research warns that risks are far from eliminated. Weather-related disruptions during the hurricane season and ongoing tensions in key regions could provide support for oil prices in the near future.
Recent data from the Energy Information Administration (EIA) in the U.S. has been somewhat bullish for crude. Commercial crude oil inventories fell more than expected, while refinery runs increased slightly. Gasoline and distillate inventories experienced draws, supporting a positive outlook for crude.
Looking ahead, Citi Research suggests that OPEC+ may face tough decisions as Brent prices decline. The group is expected to ease production cuts in October, but additional measures might be needed if prices continue to drop.
Despite challenges in refinery margins, Citi Research anticipates a possible recovery in gasoil cracks as the winter season approaches.
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Analysis:
– Oil prices have dipped to around $75 per barrel, presenting a potential buying opportunity according to Citi Research.
– Factors such as easing geopolitical tensions and China’s economic slowdown have contributed to the recent decline.
– Despite reduced risks, ongoing geopolitical tensions and weather-related disruptions could support oil prices in the near term.
– Positive data from the EIA in the U.S. indicates a bullish outlook for crude, with inventory draws and increased refinery runs.
– OPEC+ may need to consider further production cuts if Brent prices continue to fall.
– Refinery margins are under pressure, but there is optimism for a gasoil crack recovery as winter approaches.