Oil bulls moving back into the market are making a big mistake, according to one of Wall Street’s most prominent forecasters.

Crude futures jumped above $80 a barrel in London last week for the first time in two months, on signs that rising demand and OPEC+ supply cuts are finally causing global markets to tighten.

But it’s just an artificial veneer of tightness, Citigroup Inc. contends, as output curbs by Saudi Arabia and its partners camouflage the absence of a solid demand recovery in China — the world’s biggest oil importer.

“The bulls got it all wrong,” said Ed Morse, the bank’s veteran head of commodities research. “The world is still waiting for a real Chinese recovery, Europe is in recession and we still don’t know if the US will have a hard landing.”

Fundamentals in the crude market have been fragile for some time, Morse says.

Supplies are climbing outside the OPEC+ coalition, with US oil production hitting a record in March and unleashing a flood of exports. Output has also been rising within the alliance as Iran, Venezuela and Nigeria stage a comeback. Oil inventories probably increased last month, he says.

It’s taken more than 2 million barrels a day of output cutbacks by the Saudis and their OPEC+ partners to counteract that weakness, and prop up futures near $80, according to Morse.

Undeterred by last week’s rally, Citigroup is sticking with its price forecast of $83 a barrel for the summer, and Monday’s session is giving that approach some validation. Chinese data showed its economy expanded more slowly than projected in the second quarter, dragging Brent futures down 1.6% toward $78 a barrel. 

This article was provided by Bloomberg News.