Citi Stopped Out Of Oil Short At Double Digit Loss As TD Sees Oil Spiking To $145

While Wall Street was getting increasingly bulled up on oil prices, one bank was turning ever more bearish, and exactly one month ago when Brent traded at $82, Citigroup’s commodity head told Bloomberg he was advising clients to go short December Brent futures, predicting U.S. production would be “on the low side” at the end of the year while saying he doesn’t expect an LNG crunch in Europe if Russia invades Ukraine.

Boy was he wrong… but at least the pain didn’t last long and earlier today Citi announced that it was closing its oil short at a substantial, 11.5% loss:

We hit the $92/bbl stop loss on our short December 2022 (COZ2) ICE Brent futures trade established on Feb 3 for a loss of 11.5%. While our market outlook remains out-of-consensus and we continue to project significant downside for crude oil prices in a 6-9m context, the timing of this was negatively impacted from the escalating Russia/Ukraine conflict, widening supply risk premiums, and upward price momentum for the crude oil futures strip. With the potential for spot oil prices to clear $125/bbl in the short-term, we step aside. Over the next month, there will probably be a better opportunity to either tactically or thematically short the energy market again.

Meanwhile, in a far more realistic assessment, today TD Securities head of commodity strategy Bart Malek writes that any additional sanctions or unanticipated supply interruption – which are certainly coming now that buyers have balked at buying more oil from Russia  – could “easily see prices surge still higher in the near-term, as this would augment the already significant concern of a large deficit, and there are few alternatives.” Under these conditions, TD writes that it would not be surprising to see key benchmark crudes jump to around $145/b, which was last seen back in the summer of 2008. – READ MORE