Despite attacks on energy infrastructure in the UAE and the ongoing rise in geopolitical risk premiums, oil prices fell on Wednesday. The significant unexpected increase in U.S. crude oil inventories became a key factor offsetting geopolitical pressures.
On March 18, Reuters cited data from the American Petroleum Institute (API) stating that for the week ending March 13, U.S. crude oil inventories increased by 6.56 million barrels, far exceeding the 380,000 barrels expected in a Reuters survey. The strong impact of the inventory data clearly shifted market sentiment. As of the time of writing, Brent crude was down 1.3% at $98 per barrel; WTI crude fell 2.6% to $93 per barrel.
Meanwhile, Citibank warned that if transportation through the Strait of Hormuz is interrupted in the next four to six weeks, the global market could see a daily reduction of 11 to 16 million barrels of oil supply, potentially pushing Brent crude prices up to around $110 to $120 per barrel.
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<h2>UAE Attack Incident Continues to Evolve</h2>
The geopolitical risks causing recent oil price fluctuations continue to escalate, and the risk of supply disruptions has not dissipated.
Energy facilities in the UAE have been repeatedly attacked, including a drone strike on the world's largest ultra-sour gas facility, a fire in the Fujairah oil industrial area, and damage to a tanker near the Strait of Hormuz. The Shah gas field is currently still offline due to a fire caused by a drone attack; this gas field is jointly operated by the Abu Dhabi National Oil Company and Occidental Petroleum, with a daily production capacity of over 1.28 billion standard cubic feet.
Market attention is also focused on the U.S. military's precision strikes against Iranian missile positions along the coast of the Strait of Hormuz. According to Xinhua, the U.S. Central Command stated on social media on the 17th that the U.S. military used multiple 5,000-pound bunker busters to strike Iranian missile positions along the coast of the Strait of Hormuz.
Andy Lipow, president of Lipow Oil Associates, believes that while the U.S. military's use of bunker busters may temporarily increase volatility in the oil market, it could create conditions for restoring safe passage through the Strait.
<h2>Citibank: Oil Prices Could Reach $200 in Extreme Scenarios</h2>
Citibank maintains a cautious outlook on the recent crude oil market, expecting prices to remain under pressure in the short term
The bank's baseline scenario assumptions indicate that if shipping through the Strait of Hormuz is disrupted for four to six weeks, there could be a daily interruption of 11 to 16 million barrels of crude oil supply, which may push Brent crude prices to a range of $110 to $120 per barrel.
In a more extreme risk scenario, if the supply disruption is prolonged or energy infrastructure faces broader impacts, Citigroup expects the average price of Brent crude in the second and third quarters to rise to $130 per barrel, with peaks potentially reaching $150. If the impact of refined oil supply disruptions is taken into account, there is even a possibility that oil prices could rise to $200.

Despite the attacks on energy facilities in the UAE and rising geopolitical risks, U.S. crude oil inventories unexpectedly surged by 6.56 million barrels for the week ending March 13 (expected 380,000 barrels), putting pressure on oil prices to decline on Wednesday. Citigroup warned that if transportation through the Strait of Hormuz is disrupted in the next four to six weeks, Brent crude oil could rise to $110-120

- Despite ongoing attacks on UAE energy infrastructure and rising geopolitical risks, oil prices fell on Wednesday.  
- U.S. crude oil inventories increased by 6.56 million barrels, significantly exceeding expectations, impacting market sentiment.  
- Citibank warned that supply disruptions in the Strait of Hormuz could reduce daily global oil supply by 11 to 16 million barrels, potentially pushing Brent crude prices to $110-$120 per barrel under extreme scenarios.

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To hedge against the Middle East supply crisis, U.S. crude oil inventories increased by 6.56 million barrels, far exceeding expectations