Citi analysts say geopolitical tensions and extreme weather events remain risks for oil prices in the near term.

They point to conflicts in the Middle East and Hurricane Beryl as examples. However, despite these factors supporting prices in the $80s currently, Citi sees reasons for a potential softening later in the year.

“Underlying physical market strength looks set to turn softer,” Citi states. They add that while demand signals are mixed, with some bright spots like higher-than-expected gasoline demand in the US, it remains lower year-over-year.

Citi maintains its 0-3 month price target of $82 per barrel, but lowers its 6-12 month target to $72 per barrel, citing a potential supply glut post-summer.

Physical markets show a shift in focus, with buying currently concentrated on pre-summer contracts. However, “indicators could shift to softening” in September deliveries, according to Citi. This, coupled with the ongoing hurricane season, adds uncertainty.

Financial positioning appears “fairly clean” overall, though Citi notes a long position in WTI futures. This positioning could become “more neutral or even long” if short positions are concentrated in later contracts reflecting a bearish 2025 outlook, they conclude.