Crude oil hits new five-month highs, but Citi sees possible drop to $55 by late 2025

Crude oil futures climbed to multi-month highs for the second straight session on Tuesday, as concerns about tightening supplies drive up prices.

Ukraine’s recent attacks on Russian refineries could impact global petroleum supplies, potentially resulting in a decrease of ~350K bbl/day of global petroleum supplies and boost U.S. crude prices by $3/bbl, StoneX energy analyst Alex Hodes told Reuters.

Analysts at J.P. Morgan said 900K barrels of Russian refinery capacity are offline, adding a risk premium of $4/bbl to oil prices.

OPEC’s supply curbs have helped to bolster prices, and Iraq said this week it would make good on its output cuts.

Also supporting crude prices are signs of stronger demand and economic growth in China, where factory output and investment grew more strongly than expected at the start of the year, and the country refined a record amount of crude.

U.S. data is expected to reveal a second straight weekly draw in domestic crude stocks on Wednesday, as well as another draw on gasoline, according to a survey of analysts by The Wall Street Journal.

“We are in a global supply crunch when it comes to everything petroleum,” Price Futures Group senior analyst Phil Flynn says.

Front-month Nymex crude (CL1:COM) for April delivery closed +0.9% to $83.47/bbl, and front-month May Brent crude (CO1:COM) finished +0.5% to $87.38/bbl, their best settlement values since October 27 and October 31, respectively.

Nymex RBOB gasoline futures scored their seventh straight daily gain, with the front-month April contract closing +0.2% to $2.7622/gal.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (NRGU), (USOI), (UGA).

The energy sector (NYSEARCA:XLE) erased early losses, then rode the rise in crude futures and was the day’s best performing S&P sector, +1.1%; Marathon Petroleum (MPC), ONEOK (OKE), Diamondback Energy (FANG) and Valero Energy (VLO) all touched intraday record highs.

The oil and gas sector is now +7.8% since the end of February, compared to a 1.4% gain so far this month in the S&P 500.

Citigroup analysts are surprisingly bearish on crude prices, projecting Brent crude will slip a bit to average $78/bbl in Q2, before sliding to $74/bbl in Q3 and $70/bbl in Q4 and possibly continuing down to $55/bbl by late next year.

Citi’s bearish tilt is tied to concerns about OPEC+ spare capacity and new production from non-OPEC countries; the bank says OPEC+ spare capacity has increased by ~2M bbl/day from pre-COVID levels.