Citigroup expects Brent crude to fall to $60 to $65 a barrel by year-end, arguing that Strait of Hormuz traffic is normalizing and a U.S.-Iran deal is likely. Goldman Sachs and Morgan Stanley have also turned bearish, pointing to a growing global supply glut.
Citigroup, one of Wall Street's most bearish oil forecasters, expects Brent crude to decline to $60 to $65 per barrel by the end of the year, as oil shipments through the Strait of Hormuz keep returning to normal and the United States and Iran look likely to reach a broader agreement in the coming months. Prices already edged lower Monday after OPEC+ agreed to raise production, with Brent trading around $72.19 per barrel and West Texas Intermediate near $68.81 as Middle East supply worries ease.
Why Citi sees more downside
Citi told clients it would keep recommending selling any summer rallies, expecting the memorandum of understanding signed by the U.S. and Iran to evolve into a formal agreement because the incentives for de-escalation outweigh the risks of renewed conflict. The bank also points to several bearish fundamentals: China's crude demand remains sluggish, physical prices have weakened as Middle Eastern exports recover, and global inventory draws have been far smaller than many expected.
Not everyone agrees. Commercial and government oil inventories, including those in the United States, fell to multi-decade lows during the four-month conflict, and some analysts think the eventual push to rebuild those stockpiles will support crude prices.
A supply glut into next year
Goldman Sachs argues that restocking will not be enough to offset a significant supply surplus expected next year, forecasting a global oil surplus of roughly 3 million barrels per day in 2027. Samantha Dart, the bank's co-head of global commodities research, said that even if governments replenish strategic petroleum reserves by more than 1 million barrels per day, the market would still face an oversupply approaching 2 million barrels per day.
Morgan Stanley has also turned more bearish, recently cutting its oil price forecasts for the next 18 months as the reopening of the Strait of Hormuz accelerates what it expects will be a growing supply glut. Only a month ago, fears that the Hormuz lane could stay closed had pushed crude toward the mid-$90s. With the waterway reopening, the banks now point to oversupply rather than scarcity as the main driver of prices.
Source: Fort Worth Inc.
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