Citi Expects Geopolitical Risks to Add Floor for Oil

Geopolitical risks added a $4-5/bbl premium for oil earlier this week and now provides a floor for oil according to Citi’s Dirk Willer but he does not expect further escalations in the bank’s base case.

• “It is clear how much importance the U.S. has in the defense of Israel, and it is clear they have no interest to let this thing escalate and will use all the leverage they do have to keep things at a fairly manageable level,” Willer said.
• “The risks have clearly increased if Netanyahu is pushed by his coalition partners to take a more hardline view but it’s not our base case, we think we can avoid that,” he added.
• “We see oil coming off again but probably only in Q3, then things could have calmed from current levels,” he said.
• “I think we will stick around current levels unless there is a big intensification between Israel and Iran, there could obviously be other issues,” Willer said.
• “From here you would require other additional shocks and they are obviously difficult to forecast,” he added.