Citi: Oil Prices Could Rise Further on US-Iran Tensions

Key Projections Amid Geopolitical Risks

Citi analysis indicates oil prices could experience further increases if diplomatic talks between the U.S. and Iran remain difficult. The bank holds its zero-to-three-month Brent price forecast at $120 a barrel, projecting a complex market ahead.

Current Global Market Dynamics

Several factors have helped cushion the market from severe price shocks. These include strategic petroleum reserve releases, inventory drawdowns, and weaker demand signals. Additionally, data shows China may cut oil imports by approximately 2.4 million barrels per day in April and May, reducing global stress.

Economic and Market Outlook

Despite mitigating factors, Citi warns that oil markets are currently under-pricing duration and tail risks associated with geopolitical instability. The base case assumes disruption in the Strait of Hormuz will ease by the end of May, but near-term upside risks have increased.

Summary and Forward Look

Analysts expect Brent to average $110 per barrel in the second quarter, before easing to $95 in the third quarter and $80 in the fourth. However, the outcome of U.S.-Iran negotiations remains a critical factor for future price stability.

FAQ

Q: What is Citi's short-term forecast for Brent oil?
A: Citi maintained its zero-to-three-month price forecast for Brent crude at $120 a barrel.

Q: What factors are currently easing pressure on oil prices?
A: Reduced oil imports by China, strategic reserve releases, inventory drawdowns, and signs of de-escalation are helping to cushion the global oil market.

Source: Reuters via Investing.com