Citibank: If the Middle East conflict continues to escalate, oil prices may soar by more than 60%!
Citibank predicts that if the Middle East conflict escalates, oil prices in the first quarter of 2025 may soar to $120 per barrel, an increase of 62%. The current price of Brent crude oil is around $74.21. Analyst Eric Lee pointed out that if Israel's retaliatory action against Iran affects its oil production, it may lead to supply disruptions. Nevertheless, Citibank's baseline expectation is that oil prices will remain at $74, dropping to $60 by the end of next year. Other analysts are also concerned about the trend of oil prices
Citibank stated that in the first quarter of 2025, oil prices could reach as high as $120 per barrel, representing a 62% increase. As of the time of writing, Brent crude oil prices are around $74.21 per barrel.
This price is based on Citibank's bullish expectations for oil prices, premised on an escalation of Middle East conflicts leading to supply disruptions. Citibank energy strategist Eric Lee mentioned that if Israel retaliates against recent missile attacks by Iran, it could jeopardize Iran's key oil production facilities, reducing output and driving oil prices higher.
Lee stated in an interview on Wednesday, " There are multiple scenarios that could impact Iran's daily production and exports by millions of barrels. In such a scenario, we might see a situation similar to the surge in oil prices following the 2022 Russia-Ukraine conflict."
However, the bullish expectation of Brent crude oil rising to $120 per barrel contrasts sharply with the bank's base expectation, which forecasts oil prices to remain around $74 per barrel before dropping to $60 per barrel by the end of next year.
Israel also indicated that in retaliation for Iran's missile attacks on October 1st, they would target military objectives rather than nuclear facilities or oil facilities.
Lee mentioned that Citibank's base expectation implies a 18% decrease in oil prices, mainly because Saudi Arabia, the UAE, and other major oil-producing countries can intervene in the event of supply disruptions.
He estimated that OPEC+ could have up to an additional 6 million barrels per day of production capacity. Meanwhile, there have been some "issues" with oil demand, with weak Asian economies noted.
Discussing the bank's forecasts, he said, "This is a very tricky situation, a very binary market, which is why we are cautious on the bullish side."
Other oil forecasters also predict that oil prices could surge due to escalating Middle East tensions, although some believe the risk of an Iranian supply disruption is low. The Saudi oil minister said in a recent conference call that oil prices could fall by up to 33%, adding that he believes the oil production of OPEC+ countries is too high