Less than 24 hours after issuing a cautious commentary on the path forward for oil, the commodities team at Citigroup sent a report Tuesday afternoon recommending a short sale in August Brent.

The report, titled Oil Selloff Has Legs: Sell Aug-2025 Brent, declared that Citi was fundamentally bearish thanks to its view that non-OPEC+ supply growth would offset global demand growth this year.

It added that Monday's OPEC+ decision to begin increasing output in April is a "materially bearish development" that is likely to loosen markets at a point when the global macro date is starting to soften.

The Citi analysts believe that the looser market will dampen risks around an acceleration in negotiations with Iran. They also point to the possibility that President Trump will engage with Russian President Vladimir Putin and help negotiate a deal with Iran.

Citi specifically recommended that commodity clients sell August 2025 Brent futures at $69.60/bbl. The bank acknowledged risks to the trade in the form of U.S./Iran escalation but said that the sale has perhaps $9/bbl of profit potential, tied to a likely downward trajectory. The weakness could be concentrated in the next three months, it added.

In an expansion of the commentary, the bank observed that OPEC+ increases in output could be paused or reversed as market conditions warrant, but it also said it believes that pressure from the Trump administration could be destabilizing for oil prices.

Citi analysts noted that previous worries about escalation between the U.S. and Iran were keeping them away from this trade. But they said the potential for such escalation is lower thanks to Trump/Putin engagement. They added that a Ukraine cease fire and more amenable tax policies for U.S. energy companies add to the downside risk.

In a final statement, Citi also said that the demand picture for oil is softening. It expects a U.S. growth lull thanks to negative economic surprises and the eventual pass-through of DOGE job cuts to the U.S. labor force.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

--Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com

(END) Dow Jones Newswires

March 04, 2025 17:29 ET (22:29 GMT)

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