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Citi Highlights Oil on Water Increase from Red Sea Diversions


The Red Sea diversions are “indirectly tightening the market by forcing oil stocks on the water” according to Citi analysts referring to the longer journey for oil tankers around the Cape of Good Hope.

  • “Higher insurance and freight costs are placing upward pressure on oil prices” the bank said in a client note.
  • Red Sea diversions have added 35mn bbls onto the water and could increase by another 25mn bbl if 50% of vessels heading through Bab el Mandeb Strait divert the long way round.
  • Citi maintains its three-month Brent forecast at $80/bbl.
  • Citi analysts flagged Hezbollah and Iran escalations as a bigger driver for oil than Red Sea risks. “Should this materialize, we believe oil producers would look to lock in longer term prices, given the medium-term outlook for a softening market balance outlook on moderating global demand growth and solid non-OPEC supply growth” it said.

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