Oil market players are in a bearish mood, Citi has said in an update about sentiment among its clients. However, the degree of bearishness differs, the bank also said, as quoted by Bloomberg.
“Some clients doubt that a price floor at $60 a barrel for Brent crude oil would be enough to induce a supply-and-demand reaction to balance a global liquids market generally seen heading for a surplus,” Citi’s team reported. Others, on the other hand, expect a smoother price correction, pointing to inventory builds in parts of the world but not in the United States.
Separately, Citi noted “Today’s slower non-OPEC+ growth and greater OPEC+ optionality, along with heightened geopolitical risks looming on large producers,” as factors that also affect price developments and could interfere with the dominant mood on oil markets.
Bloomberg reported earlier that oil price benchmarks are down by about 10% this year, with Brent crude booking monthly losses for August and September. The decline has been driven mostly by expectations of a glut as OPEC+ unwinds its production cuts, implemented in 2022 and 2023. However, the pace of output additions has moderated in the past couple of months, tempering bearishness among observers.
On the other hand, Bloomberg again reported earlier in the week that the amount of crude oil in transit suggests a looming glut, citing data from Vortexa showing there were 1.2 billion barrels in the world ocean right now. This was the highest amount since at least 2016, the publication noted. However, this amount did not include oil in floating storage, which is what traders tend to watch for when gauging the likelihood of a supply overhang developing. China, meanwhile, continues stockpiling crude, absorbing most of the estimated excess so far this year.
“Within the energy complex, consensus sees fundamentals turning increasingly bearish on both crude oil and natural gas, but geopolitical risks make it hard to short these markets in size,” Citi said.
By Irina Slav for Oilprice.com
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