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Prepare for a 'messy' year-end for oil: Citi

Prepare for a 'messy' year-end for oil: Citi

The price of oil could come under serious pressure towards the end of the year if a recent bounce back in prices holds for the next few months, a closely-watched oil analyst has warned.

Both Brent (Intercontinental Exchange Europe: @LCO.1) and WTI (New York Mercantile Exchange: @CL.1) prices hit year-to-date highs this week, after falling well below $50 a barrel at the start of the year. But Seth Kleinman, the head of European energy research at Citigroup, warned investors not to pile money into oil funds, arguing the pickup looked unlikely to continue.

"It feels good now, but it's going to feel a lot less good in six months," he told CNBC Friday.

Weak global demand and a boom in U.S. shale oil production are seen as two key reasons behind oil's price plunge over recent months. Resistance by the Organization of the Petroleum Exporting Countries (OPEC) nations to cut back on production is another reason for the decline, which has caused prices to effectively halve since mid-June last year.

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Earlier this week, however, prices picked up, following a fall in rig counts - how many oil rigs there are in operation - in the U.S., according to recent data.

But Kleinman said prices were unlikely to stay higher in the face of an expected pickup in American rig counts towards the end of the year, and big productivity gains.

"Yeah, we may have a very sloppy (fourth quarter) if we don't have the sloppiness that we were expecting in (the second quarter)," he said.

Going forward, Kleinman said oil markets needed to rebalance and find an "equilibrium" this year, which he expects to be at around $60 and $70 dollars for Brent crude and between £55 and $65 dollars barrel for WTI.

Brent crude futures slipped on Friday morning by 0.9 percent to $63.43 per barrel at 9.30 a.m. London time. U.S. crude was down 60 cents to $56.09 a barrel following a report from OPEC Thursday showing that its output had surged in March.



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