Citi: Geopolitics Keeps Oil Supported Near $70; Political Settlements Could Trigger Downward Repricing

New York | EcoPulse24

Citi Bank believes that oil prices may remain supported in the short term, driven by the tightening of sanctions and geopolitical tensions related to Russia and Iran. However, any political settlements later this year could trigger a downward repricing in crude and refined product markets.

Recent price movements highlight the delicate balance between political risk and the prospect of relief. Over the past month, Brent crude has moved from around $60 to near $70 per barrel, fueled by stricter enforcement of US sanctions on Russian and Iranian oil exports and supply disruptions.

Brent Oil Price Data:
- Monthly range: approximately $60 to $70
- Latest Brent close: $68.65 per barrel
- Daily change: +$0.90
- Percentage increase: +1.33%

The latest escalation from Europe supports this trend, with the EU proposing to extend sanctions to ports in Georgia and Indonesia that handle Russian oil, signaling a shift toward targeting logistical routes in third countries.

Citi notes that one direct channel for US policy to impact energy markets is through pushing for a peace settlement between Russia and Ukraine, as well as de-escalation with Iran. Any tangible progress could ease supply restrictions and bring additional flows to the market, putting downward pressure on prices.

Meanwhile, China continues to purchase Russian and Iranian oil at discounted rates compared to global benchmarks, both for domestic consumption and to build strategic reserves. Citi expects this behavior to persist through 2026, as long as sanctions on Russia and Iran remain, creating a dual market for sanctioned and freely traded crude.

Key Channels of Influence:
- Tightening US sanctions on Russia and Iran
- EU proposal to expand sanctions to ports in third countries
- Continued Chinese purchases of discounted crude
- Potential peace deals that could ease supply restrictions

Markets are currently pricing in a clear geopolitical risk premium, especially given the ongoing negotiation tracks. However, this premium remains vulnerable to rapid erosion if credible signs of political breakthrough or interim agreements emerge, restoring some supply to the market.

EcoPulse24 Analysis:
Oil is trading between two limits: a geopolitical risk premium on one side, and the possibility of additional supplies returning on the other. Prices hovering near the $70 mark reflect a temporary balance between tighter sanctions and sustained global demand, particularly from Asia. Any progress in US negotiations with Russia or Iran could reshape oil flows and pressure prices, especially if global demand stabilizes. For now, geopolitics is the short-term driver, but the medium-term trend will depend on the actual volume of supply returning to the market if concrete political settlements are reached.