Why Has Oil Not Hit $150? Citi Lists Three Reasons Holding the Market Back
Citi analysts have set out three reasons why Brent crude has not breached $150 despite the Iran war and Hormuz tensions: timely use of strategic petroleum reserves, OPEC+ production discipline and the rapid response capacity of US shale. The bank expects prices to hold in an $80-$95 range through year end.
Citi's energy team has set out three main reasons that have stopped oil prices from reaching triple digits since the start of the war. First, the targeted and rapid use of the Strategic Petroleum Reserve by the United States and OECD members; the report says nearly 1.2 million barrels per day of additional supply has been released.
The second factor is coordinated behaviour from OPEC+. Saudi Arabia and the United Arab Emirates are gradually unlocking spare capacity, while member states have not strayed from quotas. Citi reckons that, if this discipline holds, the coalition could still add at least one million barrels per day from reserves.
The third and least anticipated factor is the US shale industry. Producers in the Permian basin respond to every sustained price signal above $80 with new investment plans. Citi's base case is for Brent to stay in an $80-$95 band through year end, provided there is no major Hormuz disruption.
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