The price of Brent crude oil could jump to $90 per barrel if the Strait of Hormuz is closed, stated the American multinational investment bank and financial services company Citigroup Inc., adding that a prolonged halt to shipping through this vital waterway is unlikely, writes UNN with reference to Bloomberg.
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"Any closure of the strait could lead to a sharp jump in prices," analysts, including Anthony Yuen and Eric Lee, wrote in a note, citing the bank's current optimistic scenario.
"But we believe the duration should be short, as all efforts will be focused on reopening so that it is not a multi-month closure," they added.
The Strait of Hormuz is a narrow waterway at the entrance to the Persian Gulf, through which about one-fifth of the world's daily crude oil production passes, including from major OPEC producers Saudi Arabia and Iraq. Citigroup's forecast assumes an impact of about 3 million barrels per day for several months.
According to Citigroup, any disruptions to Iranian crude oil exports may have less impact on the price than expected. The country's supplies are shrinking, and Chinese refineries are buying less, the bank reported.