Oil Prices Soar to Seven-Month High Amid Geopolitical Tensions and Inventory Concerns
Crude oil prices have surged over 20% since August 5, reaching a seven-month high of $93 per barrel. The increase is attributed to renewed geopolitical tensions and accelerating global inventory drawdowns.
The US has imposed 'the harshest sanctions in history' on Iran, according to U.S. Treasury Secretary Scott Bessent. While this move has put pressure on oil prices, it also signals a softer stance from the US, with Bessent stating that a resumption of large-scale military action against Iran is unlikely.
Citi warns that the global inventory buffer line is approaching 70 days, a level comparable to the inventory lows during the second oil crisis in the 1970s and 1980s. At this time, energy expenditures accounted for approximately 8% of GDP, translating to a composite landed price of over $200 per barrel.
Citi projects that Brent crude prices will fall back to the $60 range by 2027, assuming a negotiated agreement and the reopening of the Strait of Hormuz in the fourth quarter.