The head of global commodities research at Citigroup said that oil prices will continue to fluctuate sharply until it becomes clear whether Iran and US President Donald Trump can reach an agreement to end the war.
Max Layton of Citigroup said on Bloomberg Television’s “Surveillance” on Thursday that it’s “very hard to predict” whether Iran will reach a deal. He added: “In an environment where you don’t know if a deal will be reached at all – given the change in Iran’s new leadership – it’s very difficult to predict. You know you’ll be influenced by all kinds of news and you’ll be running around like crazy.”
This week’s oil trading confirmed Leighton’s view. The price of Brent crude oil once rose to $115.30 per barrel, then plummeted to around $96 as traders vacillated between the prospects of peace and the resumption of hostilities. On Thursday, crude oil prices fell for the third consecutive trading day, with both Brent and WTI crude oil falling below $100, while all parties are striving to end the war through new diplomatic means and reopen the vital Strait of Hormuz.
Leighton said the price cut was “in the hope that we can negotiate a deal”.
Crude oil spot supply in the region remains under pressure. According to traders who declined to be named, loading delays at an important terminal outside the Strait of Oman in April disrupted the original plan and may delay the delivery of crude oil to buyers who are already short of Middle East crude oil supply. These traders said they were not allowed to be interviewed by the media.
Leighton said that over the past 12 months, the global crude oil spot market has accumulated a “considerable buffer inventory” of about 700 million to 800 million barrels. He said, “We are actively consuming these inventories,” but the impact will “gradually dissipate over time.”
He also added that before deciding whether to lower the oil production forecast, he needed to observe whether Tehran was truly ready to reach an agreement with the United States.
Last month, as the second round of US-Iran peace talks failed to make progress, Citigroup raised its benchmark price forecast for Brent crude by $15 to $110 and pushed back the benchmark time for the reopening of the strait from mid-to-late April to the end of May.
“I don’t think this regime will last just a few months. I think it can last for years under lockdown,” said Leighton.
