Brent crude oil prices could drop to the low $60 per barrel range if a U.S.–Russia agreement occurs, easing geopolitical tensions in the market. However, Citibank analysts caution that for prices to fall further, there would need to be a significant drop in demand, particularly due to lower crude oil imports from China and less refinery activity for diesel production. On the other hand, Citibank believes prices might rise to around $80 per barrel, and even surpass $90, if geopolitical tensions persist or if demand increases. These insights were shared in a note to clients and via Reuters.

Crucial Fork In The Road

In the coming weeks, Brent crude oil faces a critical decision point. Analysts foresee a possibility where prices could either plunge into the low $60s or spike above $90. The outcome of geopolitical discussions is the key factor in this volatility. If the U.S. and Russia reach an agreement, it would reduce market fears and eliminate the elevated geopolitical risk premium currently affecting oil prices. Positive news from the upcoming Geneva summit could trigger this drop. Traders expecting a diplomatic breakthrough might consider buying puts with a $65 strike price or selling call spreads above $85. This pessimistic outlook is supported by signs of weakening demand. China’s crude imports for July 2025 fell to 10.5 million barrels per day, down from an average of 11.2 million in the second quarter, indicating a slowdown. Additionally, U.S. distillate stockpiles, which include diesel, have increased for three weeks straight, suggesting that refinery output is exceeding consumption. In 2015, the announcement of the Iran nuclear deal caused a substantial drop in oil prices as the market adjusted to reduced regional risks. A similar U.S.–Russia agreement could lead to a rapid decline in prices towards the low $60s, making this historical context important for understanding potential shifts from positive diplomatic developments.

Geopolitical Risks And Demand Signals

Conversely, if negotiations fail or tensions rise, the risk premium will likely persist. Complicating matters are unexpectedly strong demand signals from other regions. The latest U.S. jobs report for July reflects surprising growth, and global airline passenger numbers have now surpassed pre-pandemic levels, indicating a rise in jet fuel demand. For those who believe geopolitical risks will remain or that demand will be strong, the potential for prices to reach above $90 is significant. This scenario supports strategies like buying call options or selling put spreads below $70. The market is essentially waiting for a clear signal on the direction it will take. Create your live VT Markets account and start trading now.

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