For those that think the oil price is heading back up - this is...

For those that think the oil price is heading back up - this is what one analyst thinks

The recent surge in oil prices is just a "head-fake," and oil as cheap as $US20 a barrel may soon be on the way, Citigroup said in a report as it lowered its forecast for crude.
Despite global declines in spending that have driven up oil prices in recent weeks, oil production in the US is still rising, wrote Edward Morse, Citigroup's global head of commodity research. Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia. The market is oversupplied, and storage tanks are topping out.
A pullback in production isn't likely until the third quarter, Morse said. In the meantime, West Texas Intermediate Crude, which currently trades at around $US52 a barrel, could fall to the $US20 range "for a while," according to the report. The US shale-oil revolution has broken OPEC's ability to manipulate prices and maximise profits for oil-producing countries.
"It looks exceedingly unlikely for OPEC to return to its old way of doing business," Morse wrote. "While many analysts have seen in past market crises 'the end of OPEC,' this time around might well be different," Morse said.
Citi reduced its annual forecast for Brent crude for the second time in 2015. Prices in the $US45 to $US55 range are unsustainable and will trigger "disinvestment from oil" and a fourth-quarter rebound to $US75 a barrel, according to the report. Prices this year will likely average $US54 a barrel.

Citi reckons the recent oil price strength is unlikely to last and sees the potential for it to reach $US20/barrel.


Read more: http://www.smh.com.au/business/mark...rdour-cools-20150210-3ptxg.html#ixzz3RIfs9OKi