Citigroup expects Brent crude prices to tumble to between $60 and $65 a barrel by the end of the year. The bank attributes this sharp decline to easing geopolitical tensions around the critical Strait of Hormuz shipping chokepoint and a return to structurally soft market fundamentals.
As the supply disruption panic dissipates, global energy markets are quickly refocusing on a Looming market surplus.
Key Drivers Behind the Bearish Outlook
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Resuming Hormuz Traffic: Global energy markets are steadily stabilizing as commercial shipping through the Strait of Hormuz recovers. Crude shipping volumes through the vital channel have already climbed back to 7 million barrels per day.
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The U.S.-Iran Truce: Citi analysts believe the mid-June Memorandum of Understanding (MOU) signed between the U.S. and Iran will hold. Driven by “genuine conflict fatigue” and poor incentives for either side to break the peace, the broader political landscape points toward stabilization rather than renewed confrontation.
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Ramping Up Gulf Production: Fears of long-term supply shortages have evaporated as Middle Eastern producers aggressively restore output. Kuwait sharply boosted production in June, while Saudi Arabia has accelerated Asian spot-market sales by increasing its supertanker exports to 90% of pre-war levels.
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Absent Buyers: Despite shipping lanes reopening, major physical markets remain weak. Notably, Chinese buyers have remained largely absent from the market, compounding the growing oversupply.
Citi’s Trading Strategy: “We continue to recommend selling any summer rallies and forecast Brent reaching $60 to $65 a barrel by the turn of the year.”
Wall Street Consensus Shifts to a Glut
Brent futures reached a peak above $126 a barrel on April 30 following the outbreak of the conflict, but prices have fallen steadily as a truce emerged, hovering around $71.58.
While Citi’s $60 target sits on the lower end of Wall Street’s expectations, other major financial institutions are actively cutting their forecasts to reflect an emerging supply glut:
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Goldman Sachs: Cut its year-end Brent forecast to $80 a barrel, noting that Gulf exports could return completely to pre-war traffic patterns by late July. The bank added that a faster-than-expected normalization could easily drag prices down to $60.
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Morgan Stanley: Lowered its Q4 price target twice in recent weeks, cutting its Brent outlook down to $75 a barrel.
