Citigroup Says International Oil Prices Could Surge to $130 a Barrel by the End of June

[Financial News]  \r\n
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Citigroup issued a bleak outlook for global oil prices on the 21st (local time).
It warned that if crude shipments through the Strait of Hormuz continue to be disrupted, prices could rise to $130 a barrel by the end of June.
Even in the best-case scenario, global crude and product inventories were estimated to fall by about 900 million barrels.
The grim outlook came as the U.S. and Iran continued their last-minute tug-of-war ahead of ceasefire talks.
According to CNBC, Citigroup Global Markets, the investment banking arm of Citigroup, laid out three major scenarios in an analytical report.
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The best-case scenario is an extension of the ceasefire within this week. Under that outcome, traffic through the Strait of Hormuz would gradually resume throughout next month and return to pre-blockade levels by the end of June.
Even so, global crude and product inventories would still decline by about 900 million barrels.
Citigroup forecast that Brent Crude Oil, the benchmark for international oil prices, would average $95 a barrel in the second quarter before weakening. It projected prices would fall to $80 in the third quarter and $75 in the fourth quarter.
Max Layton, head of Citi Global Commodities Research, pointed out that crude and petroleum product inventories are disappearing at a rate of about 13 million barrels a day.
Citigroup also said it expects global crude and product inventories to fall to an eight-year low by the end of June, even if tensions ease this week.
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This scenario assumes the blockade of the Strait of Hormuz lasts for another month, while detour routes through the Bab-el-Mandeb Strait in the Red Sea and via Fujairah remain open.
In that case, inventory losses would reach about 1.3 billion barrels.
International oil prices would surge to as much as $110 a barrel in the second quarter, then fall to $90 in the third quarter and $80 in the fourth quarter.
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The worst-case scenario is a halt in oil supplies through the strait for eight to nine weeks, starting from the 20th.
If that happens, crude inventories would drop by about 1.7 billion barrels, hitting an all-time low.
Prices would stay around $130 a barrel through the third quarter before easing to $100 only by the end of the year.
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dympna@fnnews.com Song Kyung-jae Reporter