According to Citi analysts, geopolitics will continue to provide support for oil prices in the immediate term, but they may later come under pressure if President Trump’s attempts to clinch a peace deal with Russia and a nuclear deal with Iran succeed.
“It is our base case that both Iran and Russia-Ukraine deals happen by or during the summer of this year, contributing to a decline in prices to $60-62/bbl Brent and lowering diesel and gasoline cracks by $5-10 dollars,” the analysts said, as quoted by Reuters.
Until that happens, however, the possibility of supply disruptions resulting from sanction enforcement on Russia or U.S. military action against Iran would continue providing upward pressure on benchmarks.
At the time of writing, Brent crude was trading at $68.23 per barrel, with West Texas Intermediate at $63.39 per barrel, as the United States and Iran prepare for the latest round of nuclear talks.
Iran launched a military drill in the Strait of Hormuz on Monday as a second U.S. aircraft carrier travels to the Persian Gulf, suggesting the outcome of the talks remains highly uncertain. Iran has also stated it would only negotiate its nuclear program, following an attempt by the U.S. side to broaden the topics for discussion to Iran’s ballistic missile program.
“I think that there’s an opportunity here to diplomatically reach an agreement that addresses the things we’re concerned about,” U.S. Secretary of State Marco Rubio said earlier this week. “We’ll be very open and welcoming to that. But I don’t want to overstate it either. It’s going to be hard. It’s been very difficult for anyone to do real deals with Iran, because we’re dealing with radical Shia clerics who are making theological decisions, not geopolitical ones.”
Iran’s Foreign Minister Abbas Araqchi, meanwhile, said that he expected to “achieve a fair and equitable deal”, adding, as quoted by Reuters, that “What is not on the table: submission before threats.”
By Irina Slav for Oilprice.com
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