When and where will oil bottom? Supply cuts are coming, everyone agrees

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Citi calls the recent rise in oil "a head-fake."

A report today by Citi's commodities research team that the oil market should bottom between the end of the first quarter and the beginning of the second quarter would not have generated much interest except for the wide range of the call: oil will bottom "at a significantly lower price level" in the $40 range for West Texas Intermediate, and perhaps as lows as the $20 range.

That's quite a difference in range: $20s to the $40s.

Still, the thrust of the piece is the insistence that prices will likely go lower in the short term. The main point is that the market remains over-supplied. Levels for both on-land and floating storage will rise, as will costs for storing all the oil.

Still, other analysts have noted the oversupplied conditions but emphasized the opportunity stabilization represents for energy stocks now. This morning Iberia Capital put out a bullish note on E&P stocks, seeing substantially the same trends Citi was seeing:

1) big cuts in capital expenditures;

2) big drops in rig counts;

3) a weaker dollar (since the end of January), and

4) short covering.

In short, everyone seems to agree that supply cuts are coming, but not everyone agrees on when those cuts will stabilize the market.

After saying that oil could go as low as $20, the Citi team (led by Ed Morse) postulates that a U-shaped recovery looks "superficially more plausible," with prices falling to $45 for Brent, $35 for WTI.

What's the bottom line? Oil may drop short-term, but they are maintaining an earlier call that Brent will be $75 by Q4 2016, "closer to a V-shaped than U-shaped recovery despite overall bearish and bullish supply uncertainties."

U-shaped, V-shaped. That cover everything?