Citi warns surging oil prices could create 'hostile environment' for stocks

Both oil futures contracts hit their highest since November 2014 last week at 78 dollars and 71.89 dollars a barrel, respectively as markets anticipated a sharp fall in Iranian crude supply once US sanctions bite later this year.

Brent crude futures, the global benchmark for oil prices, were at $78.21 per barrel at 0639 GMT, virtually unchanged from their last close and not far off a three-and-a-half year high of $78.53 a barrel reached the previous session.

Once the sanctions are reinstated later this year, traders expect a massive decline from 200,000 to about 1 million barrels per day (bpd) in Iran's oil exports, which may put the already squeezed crude markets at risk of becoming undersupply.

A almost 200% jump in oil prices over the past two-plus years could soon create a "particularly hostile environment" for global investors, Citibank economists warned Monday.

At 1100 GMT, ICE July Brent crude futures were trading at $79.14/b, up 91 cents from Monday's settle, while NYMEX June WTI crude futures were 65 cents higher at $71.61/b.

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The tightening market has all but eliminated a global supply overhang which depressed crude prices between late 2014 and early 2017.

World oil prices have surged by more than 70 percent over the past year as demand has risen sharply but production has been restricted by the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and other key producers including Russian Federation.

Opec figures published on Monday showed that oil inventories in the Organisation for Economic Co-operation and Development (OECD) industrialised nations in March fell to 9-million barrels above the five-year average, down from 340-million barrels above the average in January 2017.

Investment analyst William O'Loughlin said Saudi Arabia's and the rest of OPEC's dedication to cut production is a huge factor in maintaining oil prices at the moment, as well as the potential for less exports from Iran because of the sanctions. The Permian basin in Texas, the biggest United States oil patch, is expected to see output climb 78,000 bpd to a fresh record of 3.28-million bpd.

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