Citigroup: Oil prices could fall to $60 after Hormuz risk recedes

Brent crude oil prices face further downward pressure, with bank analysts predicting they could fall to $60 per barrel within the year.

Citigroup predicted in a research report on Friday that Brent crude will drop to the $60–$65 per barrel range by the end of the year as the situation in the Strait of Hormuz normalizes. The bank advises traders to short-sell during the summer price rebound. Meanwhile, Goldman Sachs and Morgan Stanley have also lowered their oil price forecasts, with bearish sentiment increasingly converging among major Wall Street institutions.

Citigroup analysts Francesco Martoccia and others wrote in the report: "Fundamentals are rapidly reasserting dominance in the market. Shipping flows are normalizing, physical crude markets have softened significantly, and inventory draws are far below expectations."

Brent crude was at $71.57 per barrel on Friday, down significantly from its peak of over $126 per barrel on April 30—the highest level since 2022. The January futures contract was trading at around $73, suggesting clear downside from current market pricing according to Citigroup's forecast.

The ceasefire agreement is expected to continue, and the de-risking premium is the core logic behind the oil price decline.

The core premise of Citigroup's bearish view on oil is that the US-Iran ceasefire agreement will remain effective. In mid-June, the US and Iran signed a Memorandum of Understanding (MOU) announcing a suspension of hostilities, after which Brent crude prices have generally remained below $80 per barrel.

Citigroup analysts noted in the report that while brief frictions may occur, both sides have strong incentives to maintain the agreement. "We expect the MOU to hold and transform into a formal agreement in the coming months, because for the US, Iran, and most of the Middle East, the incentives for de-escalation far outweigh those for confrontation."

The report also stated: "Both the US and Iran have shown genuine conflict fatigue, and Lebanon, as a potential source of disruption, is increasingly constrained by the broader US preference for de-escalation."

Hormuz shipping resumes, supply pressure accelerates rebuilding

The Strait of Hormuz is a key channel for oil-producing countries in the Persian Gulf to reach global markets. According to Citigroup analysts' data, the strait experienced a dual blockade during the conflict, and crude oil transit volume through the strait has now recovered to 7 million barrels per day, compared to 15 million barrels per day before the conflict.

The analysts also pointed out that actual shipping volumes may be higher than official data suggests, as many vessels have turned off their Automatic Identification System (AIS) transponders for security reasons. Citigroup described the current transition phase as "expected to be noisy" because shipping routes, insurance markets, and logistical bottlenecks are still adjusting, but emphasized that "the return of organized shipping patterns and rising volumes indicate that commercial operators increasingly view the current risk environment as manageable rather than insurmountable."

According to Bloomberg, some major European powers have now accepted that vessels transiting the Strait of Hormuz will need to pay fees to Iran and Oman.

Multiple institutions bearish simultaneously, supply-demand balance tilting faster toward surplus

Citigroup's pessimistic forecast is not isolated; other major institutions are also revising their outlooks downward. Goldman Sachs lowered its Brent crude year-end forecast to $80 per barrel in mid-June, and its commodities team noted that Persian Gulf crude flows could return to pre-war levels as early as early July, expecting the global oil market to return to a supply surplus as Iran's war impact fades and Hormuz flows recover. Morgan Stanley has cut its oil price forecast twice in recent weeks, with a strong emphasis on oversupply risks.

However, Goldman Sachs analysts remain more cautious than Citigroup regarding Iran's willingness to maintain the ceasefire.

Citigroup analysts concluded that with supply recovery and weak demand working together, "fundamentals are rapidly reasserting dominance in the market," and Brent crude has fallen about 30% in the second quarter, erasing all gains made during the conflict.

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