A Citigroup research report indicates that although the market initially anticipated a significant crude oil supply surplus this year, prices are likely to remain persistently higher than many expected. The report also notes that recent events alone cannot fully account for the current price strength. Brent crude is currently hovering around $68 per barrel, a level substantially above the approximately $50 per barrel price that might be expected in a surplus environment. Citi has long maintained an average price forecast of $60 per barrel for the year.

Production disruptions in Kazakhstan, severe winter weather in the United States, heightened geopolitical tensions in the Middle East, and tighter U.S. restrictions on purchases of Russian oil have collectively driven and sustained prices above the $60 per barrel mark. As temperatures rise in the U.S. and production resumes at Kazakhstan's Tengiz field, oil prices may see some moderation. The price spread between Brent and Dubai crude is expected to narrow, implying a weakening of Brent relative to Dubai.

However, a further escalation in geopolitical tensions could potentially push oil prices towards the bank's zero-to-three-month target of $70 per barrel. Meanwhile, global and U.S. petroleum inventory data reveal that crude stockpiles are declining, while inventories of refined products are increasing. This situation is largely attributed to Winter Storm Heather, which impacted large parts of the United States and distorted recent weekly data.

The severe cold weather, coupled with rising heating demand, could exacerbate tight diesel supplies. Concurrently, refinery operations have been hit by freeze-offs, and U.S. crude oil production has been affected by well freeze-ins. Oil trade along the U.S. Gulf Coast may also experience disruptions as a result of these conditions.