Citi Predicts Oil Prices May Exceed $100 Amid Middle East Tensions

The global oil market is currently facing significant uncertainties, particularly due to escalating tensions in the Middle East. These geopolitical conflicts have raised concerns about potential disruptions in oil supply, which could lead to a surge in prices. According to a recent report from Citi Research, the bank has revised its projections for oil prices, indicating that they could exceed $100 per barrel if the situation worsens.

Citi Research has upgraded its bullish scenario for oil prices for the fourth quarter of 2024 and the first quarter of 2025, now forecasting prices to reach as high as $120 per barrel. This is a substantial increase from their previous estimate of $80 per barrel. The bank attributes this adjustment to the heightened risk of supply losses in the market, driven by the ongoing conflicts in the Middle East.

Despite this optimistic outlook, Citi has maintained its baseline forecast, predicting that Brent crude will average $74 per barrel in the fourth quarter of 2024 and $65 per barrel in the first quarter of 2025. This cautious stance is based on what they describe as weak underlying oil market fundamentals. Furthermore, the bank has kept its bearish scenario intact, which includes the possibility of OPEC+ increasing production starting in December. In this scenario, they estimate oil prices could drop to $60 per barrel in the fourth quarter of 2024 and $55 per barrel in the first quarter of 2025, with a 20 percent chance of this occurring.

As of now, Brent crude futures are trading around $77 per barrel, while U.S. West Texas Intermediate crude futures are at $74 per barrel. Historical analysis by Citi suggests that major geopolitical events affecting oil supply typically do not last longer than a few quarters. This insight provides a glimmer of hope for consumers and businesses alike, as it implies that any price spikes may be temporary.

While the potential for oil prices to soar above $100 per barrel exists due to geopolitical tensions, it is essential to consider the broader market dynamics. The oil market is influenced by a multitude of factors, and while fear of supply disruptions can drive prices up, historical trends suggest that such spikes may not be sustainable. As consumers, staying informed about these developments can help us better navigate the complexities of the oil market and its impact on our daily lives.