Analysts from Citi predict a significant drop in Brent crude prices to $60 a barrel by year-end, banking on the U.S.-Iran truce to hold.
Citi analysts said that the memorandum of understanding (MOU) inked between the U.S. and Iran in mid-June will endure, despite potential “temporary flare-ups.” The analysts attribute this to the absence of incentives for either party to violate the agreement and the “genuine conflict fatigue” displayed by both nations, reported the Financial Times on Friday.
They further underscored the role of Lebanon, a possible disruption source, which is increasingly restricted by a broader U.S. preference for de-escalation. They advised traders to sell into oil price rallies over the summer and projected Brent prices to range between $60 and $65 a barrel by year-end.
The report also pointed out an increase in shipping volumes through the Strait of Hormuz to 7 million barrels a day of crude oil, compared with 15 million before the conflict. The analysts suggested that these volumes are likely higher than official data indicated due to many vessels disabling their transponders for security reasons.
At the time of writing, Brent crude oil price was trading 0.33% lower at $72.12 per barrel, while the WTI crude futures were trading 0.28% lower at $68.50 per barrel.
