Goldman Sachs’ Jeff Currie warns paper crude near $100 is far below physical oil markets trading $130 to $170. Citi lays out two paths for U.S.–Iran war

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Citi’s “two scenarios” for the US war on Iran:

First Scenario
“Over the next several weeks, the Administration’s appetite for the conflict diminishes and the United States pulls out, declaring the operations a resounding success. As the US pulls out, the Iranian regime takes the opportunity to step back, take stock, consolidate, and rebuild. In tandem, Iran reduces pressures in the Strait of Hormuz, and the flow of shipping gradually resumes. Notably, this scenario would also prevail if heavy US military operations rapidly clear Iranian resistance in the Strait.

In this scenario, the brent oil price would continue to cycle at roughly $90-110/barrel for the next month or so. But pressures would gradually ease, and oil prices would retreat to around $85/barrel on average through the second quarter, and then back to $70/barrel through the second half of the year.”

Second Scenario
“The US ceases military operations over roughly the same timeline. However, in this case, the Iranians say, “You’re done, but we’re not”—and they continue to block traffic in the Strait. The upshot would be a very messy—and uncertain—three to six months, as the United States and its allies took steps to clear the Strait. This would perhaps require boots on the ground. It would also threaten more extensive damage to oil production infrastructure in the Middle East.

In this scenario, brent prices would remain at or above $100/barrel through much of this year. Whether that would mean $100/barrel or $140/barrel would depend on a range of specifics—including the success of governments in deploying strategic reserves, the ability of the Saudis and the Emiratis to use ports in the Red Sea, the extent of damage to the underlying oil production infrastructure in the Middle East, and the ability of emerging laser-based technologies to blunt the threat from drones.”