Citi cuts forecast for WTI crude futures in fourth quarter of 2015

Oil prices have risen too quickly this year, one of the world's leading brokers believes.

The oil recovery may stoke a recovery in output of so-called US 'tight oil', said Citi's commodity research team, with the trajectory of shale oil production this year likely to be crucial.

Thus far in the second quarter of 2015 crude futures have rallied 19%.

Hence, the broker, in a research report e-mailed to clients, said it believed that the price action over the rest of the year will be more of a “high-to-low” rather than a “low-to-high” scenario.

With West Texas Intermediate (WTI) crude futures trading above $60 per barrel, US output could return sooner than expected, particularly if producers add to the 35% of already hedged 2015 output.

Nevertheless, “the level of uncertainty in the market is high,” the analysts admitted, as markets cannot draw any historical comparisons to guide them.

Among the other drivers of the oil price which investors should watch are the strength of the US dollar, the result of the negotiations with Iran and – in particular – the possible exit of financial investors from the oil space.

So while Citi has upped its 2015 price forecast for WTI crude futures by five dollars, it also trimmed its projection for fourth quarter prices to $54 per barrel.

The team's 2016 WTI price estimate was kept at $63 per barrel.