The recent decline in oil prices is primarily due to the easing of geopolitical risks and a slowdown in Asian economies. Hopes for a ceasefire in Gaza, combined with weak industrial production and soft oil import data from Asia, have collectively dampened global demand prospects, leading to a reduction in the geopolitical risk premium.
However, Citibank warns that market risks have not been fully eliminated. The threat of the hurricane season to oil supply chains and ongoing tensions in North Africa and the Middle East could still trigger new turmoil. If Brent crude oil prices drop to around $75, the current short positions in the market may trigger a rebound.
The U.S. Energy Information Administration (EIA) reported a significant reduction in U.S. crude oil inventories by 4.6 million barrels to 426 million barrels, exceeding expectations. Increased refinery operations and crude oil exports have also added a bullish tilt to the short-term outlook for crude oil.
Citibank also noted that the 200-day moving average of Brent crude oil is a strong resistance level, while $75 is a key support level. When prices approach the lower end of this range, it may attract investors to enter the market.
Looking ahead, Citibank believes that OPEC+ will face crucial decisions in October. If oil prices fall to the low $70s, OPEC may reassess its strategy. Refinery profit pressures, especially the decline in gasoline prices, make the upcoming winter a key factor influencing market direction.
As of 9:20 AM Beijing time on August 23, Brent crude oil was priced at $76.56 per barrel.
