Citi analysts are examining why oil prices remain elevated despite an apparent global oversupply. They cite various factors contributing to the price strength, including severe cold weather in the U.S. and increased buying from China. Brent futures climbed 3% to $69.40/bbl, while West Texas Intermediate crude futures rose 3.2% to $65.27/bbl, reflecting market tensions.

Contributing to the price surge is the outage at the Tengiz oil field in Kazakhstan, which has tightened the Brent market. Geopolitical risks also play a role, with analysts suggesting potential U.S. actions against Iran have added a premium of $3 to $4 per barrel. Restrictions on Russian oil purchases further squeeze supply.

Citi estimates the market is oversupplied by about 2 million barrels per day, which should push prices to around $50/bbl. However, prices are well above that level. One factor is continued Chinese buying for inventory purposes. Investors should watch how long these factors continue to support prices.