Citi Predicts Possible Rebound in Oil Prices After Recent Sell-Off

Citi Research has identified a potential buying opportunity in the oil market as prices have dipped to around $77 per barrel. The recent decline in oil prices can be attributed to easing geopolitical risks, particularly in Gaza, and China’s economic slowdown. However, Citi believes that this price pressure could signal a forthcoming rebound, despite the temporary calm in geopolitical tensions.

While the current market positioning is historically short, Citi warns that risks still exist. Factors such as the ongoing hurricane season and lingering tensions in North Africa and the Middle East could reignite volatility in the market. Additionally, technical factors, such as Brent’s 200-day moving average at $82.5 per barrel acting as a strong resistance point and the $75 per barrel level serving as a key support, could influence buying behavior.

Looking ahead, Citi suggests that OPEC+ faces critical decisions as production cuts are set to ease in October. Any further decline in prices towards the low $70s may prompt the group to reassess its strategy. With refinery margins under pressure, particularly from falling gasoil cracks, the upcoming winter season could play a crucial role in shaping the direction of the market.

In the U.S., the Energy Information Administration reported a significant drop in commercial crude oil inventories, which adds a bullish tilt to the near-term outlook for crude. Overall, Citi’s analysis points towards a possible rebound in oil prices, highlighting potential opportunities for investors in the current market environment.

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