An average price of $80 a barrel for this quarter is "realistic," with spikes to $90 or even $100 possible if further disruptions worsen a supply crunch amid rising consumption, Citi's Global Head of Commodities Research, Ed Morse, said Tuesday.
Benchmark Brent crude topped $85 early last month on concern United States sanctions on Iran would create a shortage. Prices have since dropped back.
The outlook comes as the Organisation of the Petroleum Exporting Countries (OPEC), and its allies send mixed supply signals to the market, with Russia suggesting it could push output to a record and an OPEC committee signaling the group could cap supply again in 2019.
Central to the uncertainty is Iran, where the U.S. imposed sanctions this week, while granting waivers to eight buyers of its crude.
Iran is likely to continue sales of about one million barrels a day, Morse said in a Bloomberg Television interview, adding that the waivers don't allow unlimited purchases.
"How much oil is being granted from Iran to each of those eight countries? We can only surmise until we get a tweet from somebody in the government," he said.
Supply disruptions can also be expected elsewhere, including in OPEC nations Nigeria, Libya and Venezuela, according to Morse.
In Nigeria, where elections are coming up, "there are always disruptions and they average about half a million barrels a day," he said.
Next year, Citigroup sees the demand picture changing as potentially slower economic growth weighs on energy use.
"Longer term, there are lots of road blocks to demand," Morse said. "I think demand at stake is maybe 500,000 barrels a day lower next year than this year."
The Nigerian National Petroleum Corporation (NNPC) could sign crude-for-product deals with Shell and ExxonMobil, similar to one signed with BP last week, a senior NNPC official said on Monday.
The NNPC announced last Wednesday that it had signed such a deal with BP and would provide more details later.
"Unfortunately, Shell and ExxonMobil exited the downstream sector in Nigeria a couple of years ago but they are coming back for this particular arrangement, because it's an opportunity for them to get crude and sell their products to the refineries," NNPC's chief operating officer for upstream, Bello Rabiu, told Reuters on the sidelines of an African oil and gas conference in Cape Town.
NNPC imports about 70 percent of Nigeria's fuel needs, mainly petrol, via swap contracts. NNPC has contracts, known as direct sale direct purchase agreements, with 10 consortiums that include trading houses Vitol, Trafigura , Mercuria and Total.
The Corporation extended the existing contracts to June 2019 but several trading sources in the consortiums said they had requested new price terms.
Rabiu said NNPC hoped in 2019 to emulate savings of around $1 billion seen in 2016 with its crude-for-product swaps, which he said would likely end once the country revamps its refineries.