Citigroup: Oil Prices Will Continue to Experience Sharp Volatility Pending Clarity on US-Iran Deal

Odaily reported that Max Layton, Citigroup's Global Head of Commodities Research, stated that oil prices will continue to experience sharp volatility until clarity emerges on whether Iran can reach a deal with President Trump. "It's very difficult to predict whether Iran will reach an agreement. In this environment where you simply don't know if a deal will be struck, the market is inevitably news-driven and subject to violent fluctuations." On Thursday, crude oil fell for the third consecutive trading day. Layton noted that this decline was partly due to "the market hoping that both sides can initiate negotiations for an agreement."

However, pressure on the physical crude market in the Middle East persists. Traders said that in April, shipment delays occurred at a key crude oil loading terminal off the coast of Oman, located outside the Strait of Hormuz, disrupting transportation plans and potentially delaying deliveries to buyers. Layton stated that over the past 12 months, the global physical crude market has accumulated approximately 700 million to 800 million barrels of "a fairly substantial buffer inventory." "We are consuming these inventories quickly," he said, but added that the impact will "materialize gradually over a longer period." He further noted that before actually lowering his oil price forecast, he needs to see whether Iran is genuinely ready to reach a deal with the United States.

Last month, after the second round of US-Iran peace talks failed to take place, Citigroup raised its forecast for the Brent crude benchmark price by $15 to $110 per barrel and pushed back its baseline assumption for the reopening of the Strait of Hormuz from mid-to-late April to the end of May. (Jin Shi)