Oil prices will surge to $70 per barrel by year-end - Citi

US investment bank Citi has posted a bullish prediction about oil prices. As supply and demand levels continue to rebalance, crude is likely to reach $70 per barrel by the end of 2017, the bank said in a note.

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However, the increase will come gradually, and a surge is to be expected a few months later, said Citi.

"Oil prices are not likely to stray far from their current $53-58 per barrel range in the near term as record investor net length and bearish inventory data will likely cap prices until more tangible evidence of a tighter market emerges," Citi’s analysts wrote.

On Wednesday, crude prices were slightly down after the rally on Tuesday with Brent trading at $56.50 per barrel and WTI trading at $54.26.

Citi expects to see a positive result from an OPEC production cut, which reported 93 percent compliance in January. The bank added that heavy refinery maintenance in Asia planned for the spring is also a decisive factor for oil prices.

Another US bank - Goldman Sachs - expects oil inventories to keep falling globally. While stocks are likely to rise in the US, production cuts and strong growth in demand will be more significant, the bank said.

"We do not view the recent US builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness. Given our unchanged 1.5 million barrels per day growth forecast for 2017, this higher base demand level should fully offset higher US output,” Goldman said in a note.

"While the production cuts have so far reached a historically high level of compliance at 90 percent [93 percent, according to OPEC], the rebound in US drilling activity has exceeded even our above consensus expectations," the bank added.

However, the bank warned the data indicates a further improvement in shale productivity and investment in the industry rather than a significant price rise.