Oil prices could rise to the low-to-mid-$80’s, bouncing up from a recent sell-off, Citi Research said in a note on Wednesday, citing factors including geopolitical tensions and weather.

Fundamentals, weather, geopolitics and financial flows could all give oil prices temporary support, it said.

On Wednesday, Brent crude futures settled up $1.85, or 2.42%, at $78.33 a barrel. U.S. West Texas Intermediate crude CLc1 gained $2.03, or 2.77%, to $75.23. O/R

WHY IT’S IMPORTANT

Brent slumped on Monday to its lowest since early January and WTI touched its lowest since February, as a global stock market rout deepened on concerns about a potential recession in the U.S. after weak jobs data.

Commodities including oil joined the global sell-off as fears of a U.S. recession stoked worries over demand.

KEY QUOTES

“There is a possibility of a bounce in prices to the low-to-mid-$80s again for Brent, at which point we would again recommend selling strength,” Citi said.

“Oil prices have mostly brushed off (geopolitical) risks for now, perhaps seeing a narrow path from conflict to actual physical oil disruptions … Still, miscalculations could potentially lead to unforeseen escalation and contagion across the region.”

CONTEXT

The Middle East is bracing for a possible wave of attacks by Iran and its allies following last week’s killing of senior members of militant groups Hamas and Hezbollah, with concern rising that conflict in Gaza could turn into a wider war.

Libya’s National Oil Corp declared force majeure on Wednesday for Sharara oilfield, a day after saying it would decrease output from the field due to protests.

Tropical Storm Debby brought unrelenting rain to the U.S. Southeast as it drifted off the Carolinas, threatening the region with dangerous flooding.
Source: Reuters (Reporting by Anjana Anil in Bengaluru; Editing by Tom Hogue)