Brent crude oil price flirts with $70 per barrel; 4 reasons why it may touch $80 soon

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Published: January 10, 2018 5:09:10 PM

Citigroup Inc predicts that wildcards including war, Middle East tensions, Donald Trump and Kim Jong Un driving crude toward $80 a barrel.

Oil prices,  US crude inventories, Brent futures, US commercial crude oil, WTI, OPEC, Saxo Bank, Energy Information Administration Citigroup Inc predicts that wildcards including war, Middle East tensions, Donald Trump and Kim Jong Un driving crude toward a barrel. (Image: Reuters)

Just last week, as the Brent crude oil price hovered over $67 per barrel, the analysts pegged that it would touch $70 soon. But now we are talking about a whole new trajectory, in which the oil price is flirting with $70 per barrel and on its way to hit even $80 per barrel soon. Brent touched $69.29 in late Tuesday trading, the highest December 2014.

Citigroup Inc predicts that wildcards including war, Middle East tensions, Donald Trump and Kim Jong Un driving crude toward $80 a barrel. However, the most wide-ranging systemic risk to commodities this year could be President Trump disturbing the political world order, Bloomberg quoted Citigroup as saying.

Here’s why oil is on the boil:

1. US President Donald Trump has shifted the focus to geopolitical risks, with his pursuit of sanctions on Iran and North Korea potentially having significant consequences. Re-imposing of US sanctions on Iran, the third-biggest OPEC producer, is likely to dislocate at least 500,000 barrels of the Middle Eastern nation’s oil exports, resulting in a $5 price increase to oil, CITI group said.

2. OPEC and non-members led by Russia decided to extend cuts in oil output until the end of 2018 from March 2018 earlier, as they battle a global glut of crude after seeing prices halve and revenues drop sharply in the past three years. The producers are currently cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost the price.

3. The rising demand by countries like the United States and China and tighter supplies may even push the oil prices further. In fact, the Saudi break-even oil price to achieve zero deficit in 2017 is $73.10, according to the International Monetary Fund.

4. The rhetoric from and toward North Korea has also escalated in the past few months, carrying the “non-negligible risk” of turning into a military conflict. Stockpiling of strategic goods such as crude may accelerate with the risk of war.

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