Citi said on Wednesday that factors beyond immediate supply forecasts may keep oil prices elevated, even as many market participants began the year anticipating a significant oversupply. In a note, the bank highlighted rising geopolitical risk, stricter U.S. limits on purchases of Russian oil and continued imports by China as forces that have sustained recent price strength.
The bank pointed specifically to production disruptions in Kazakhstan, unusually severe cold in parts of the United States, heightened tensions in the Middle East and a tightening of U.S. restrictions on Russian crude as contributors to prices remaining above $60 a barrel.
Oil moved higher on Wednesday to its strongest levels since late September amid renewed concern over Iran and additional support from a weaker U.S. dollar. In public comments, U.S. President Donald Trump urged Iran to negotiate on nuclear weapons or face an attack the U.S. said would be far worse. Tehran responded with a threat to strike back against the United States, Israel and those who support them.
Citi estimated that the prospect of Iran being attacked has added a geopolitical premium to oil of roughly $3 to $4 a barrel. The bank said any further escalation of tensions would push that premium even higher. Reflecting that dynamic, Citi set a 0-3 month price target of $70 a barrel and said its bullish price case of $72 per barrel would correspond to a scenario in which heightened geopolitical risk materializes.
Chinese purchasing activity was also singled out as a factor that may help explain oil's unexpected resilience. Citi noted ongoing inventory-driven imports by China and estimated that apparent crude stock builds averaged about 0.7 million barrels per day in 2025.
On the policy side, OPEC+ is expected to maintain a pause on output increases for March at a meeting on Sunday, according to the view conveyed by three OPEC+ delegates. Citi underscored that a continued pause and a drop in Kazakhstan's output have supported prices. The bank added that even if OPEC+ resumes production increases from April, the practical effect of tighter restrictions on purchases of Russian oil - including measures affecting India - could reduce the usable supply that would otherwise offset higher prices.
Key takeaways:
- Citi projects a near-term price target of $70/bbl and a bullish case at $72/bbl if geopolitical tensions intensify.
- Geopolitical premium tied to Iran risks is estimated at about $3-$4 per barrel.
- Supply disruptions, strong Chinese buying and policy limits on Russian crude are cited as primary price supports.