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The volatility that caused oil prices to fluctuate in the last quarter may have moderated, but Citi's global head of commodity research said the market's "nightmare" was not over yet.
Oil prices reached their highest level in two months on Monday before dropping 3.6%. Morse pointed to the day-to-day evolution of currency effects and expectations that closely followed the rise in US crude inventories in the United States last week.
In the coming weeks and months, the oil market will have to deal with many moving parts, says Morse.
At the moment, the new American sanctions imposed on Venezuela have displaced half a million barrels of heavy crude a day. Meanwhile, the United States and China are in talks to settle a trade dispute that could slow global growth and reduce fuel demand if it is not resolved.
Major oil producers led by OPEC will meet in March and April to discuss their agreement to reduce production and drain excess production. Then, in May, President Donald Trump must decide whether to renew the six-month waivers allowing several countries to continue buying Iranian crude.
"We have a lot of potentially bullish movements in the market" after a period of slackening demand before the seasonal rise in fuel consumption starts around May, said Morse.
Citi expects Brent crude to continue to climb in the mid-range of $ 60 and reach $ 70 before the end of the year. That's enough to keep another badet: the increase in oil production in the United States.
While some US drillers are cutting spending after the price collapses, a $ 65- $ 70 Brent will encourage American producers to allocate more money to drilling, Morse says. According to Citi, the Brent discount on Brent in the United States of Western West Texas is tightening, which prevents the WTI benchmark from falling below the $ 50 to $ 55 range.
"We think this is enough to keep the growth of US production at a good million barrels a day, no matter what OPEC does on the price level," Morse said.
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