Citi Research on June 6 raised its quarterly oil price forecasts for this year and its year-average outlook for 2023, because additional supply from Iran looked heavily delayed, adding to tighter market balances.
Delay in Iran sanctions relief is the main factor tightening balances, Citi said.
The bank now factors in Iran sanctions relief beginning in the first quarter of next year, at first adding 500,000 bbl/d, then 1.3 million bbl/d over the second half. It previously expected Iran sanctions relief to add supply in mid-2022.
Iran and the U.S. engaged in indirect talks in Vienna over the past year to revive a 2015 nuclear agreement between Tehran and world powers.
Citing tighter market balances, Citi raised its second-quarter 2022 Brent price forecast by $14/bbl to $113/bbl, and the third and fourth quarter prices by $12, to $99 and $85, respectively. The bank estimates Brent to average $75/bbl in 2023, revised higher by $16.
Benchmark Brent crude futures were up at about $120/bbl, while WTI crude futures in the U.S. gained to $119/bbl after hitting a three-month high on June 6.
“We continue to see a downward trend to prices after a spiky near-term period, on progressively loosening supply-demand balances,” Citi said.
While Russian oil production and exports continue to be eroded, Citi said expectations of a drop in Russian production of 2 million to 3 million bbl/d were exaggerated.
Reconfigured flows to Asia could mean Russian production and exports would not ultimately fall so much, but more in the range of 1 million to 1.5 million bbl/d, the bank said.
“Of 1.9 million bbl/d of European seaborne exports of crude oil, around 900,000 bbl/d could divert to other markets such as China/India or could stay in some European markets with limited access to non-Russian oil.”
Citi sees weaker oil demand growth of 2.3 million bbl/d in 2022 because of economic headwinds, lockdowns in China and high prices.
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