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By Bloomberg

Oil as low as “the $20 range,” or less than half the current price, is possible by the start of the second quarter as oversupply ends up filling storage tanks close to capacity, Citigroup Inc. said.

West Texas Intermediate, the U.S. crude benchmark, has dropped about 45 percent in the past six months as the U.S. pumped more shale oil and OPEC resisted calls to cut production, stoking a supply glut. Recent gains due to signs of a U.S. drilling slowdown appear “more like a head-fake than a sustainable turning point,” Edward Morse, Citigroup’s global head of commodity research, said in a report e-mailed Monday.

“Not only is the market oversupplied, but the consequent inventory build looks likely to continue toward storage tank tops,” Morse said. “It’s impossible to call a bottom point, which could, as a result of oversupply and the economics of storage, fall well below $40 a barrel for WTI, perhaps as low as the $20 range for a while.”

WTI rose 0.2 percent to $51.81 a barrel by 12:14 p.m. in Dubai on the Nymex, after gaining 7.2 percent last week. Brent, used to price more than half of the world’s oil, dropped 0.5 percent to $57.50 a barrel.

Oil should bottom between the end of the first quarter and beginning of the second quarter in the $40 range, Morse said. At that point, the market should start to balance, first with an end to inventory builds and later on with declining stockpiles.

Oil supply will probably exceed demand by 700,000 barrels a day in the first quarter and 800,000 barrels a day in the second quarter, Morse said in the report. Stockpiles at Cushing, Oklahoma, the delivery point for WTI, have climbed 29 percent this year to 41.4 million barrels by Jan. 30. They are “heading toward tank-tops,” according to Morse.