Citigroup, BMO Joins the Oil Bulls Amid Further Talk of $100 Crude

Citigroup, BMO doubt prices will reach the triple digits anytime soon. File Image / Pixabay

In a week that saw a diverse range of analytical forecasts about the consequences of the U.S. pulling out of the Iran nuclear deal, only one sentiment was shared during Friday sessions with media: crude prices will climb for the foreseeable future.

However, the prospect of oil hitting $100 as some of the more skittish U.S./Iran observers have suggested will happen, is unlikely.

Eric Lee, energy strategist at Citigroup, told Bloomberg television that the U.S. exiting the Iran deal is "clearly a bullish development" that will lead to prices in the $70s this year and possibly in the $80s in the near term.

He went on to say that his firm always has a base, a bull, and a bear case to determine its outlooks and that even the base case for 2018 saw oil in the $60s, with a possible decline next year - but he stressed that with so many moving parts to influence crude traders, it's almost impossible to determine where prices will ultimately wind up.

As for the resurfacing sentiment among pundits this week that oil could climb to $100 next year thanks to geopolitical tensions, Lee said, "to us we think this is much less likely" because of the likelihood of Iran being able to export oil to the many countries that don't support the U.S. sanctions against the Islamic republic, as well as the possibility of more oil coming from Russia and the Organization of the Petroleum Exporting Countries "sometime soon." 

Will Kennedy, analyst for Bloomberg, also said oil at $100 is unlikely, because if supply shortages become apparent due to Iran or other factors, "the Saudis are going to come under huge pressure to increase production."

He suggested that the Saudis are the key to offsetting market problems incurred by Iran, because as voluminous as U.S. shale has become, it won't accommodate every market "because it's very light sweet crude [and] not suitable for all refineries."

Morgane Delledonne, global asset management ETF investment strategist for BMO, is yet another analyst who predicted a higher crude price trend: she also told Bloomberg television that the expected volatility in oil will likely translate into more volatility in inflation expectations.

Predictions of $100 per barrel oil are nothing new, but they became a point of serious debate this week shortly after U.S. president Donald Trump announced his decision on Iran, when Bank of America Corp. theorized that this along with Venezuela's worsening production woes could result in crude rallying back into the triple digits next year.