Citi forecasts Brent crude will attain $120 per barrel close to time period, warning oil markets are under-pricing extended provide disruption threat, with a bull case of $150 if Hormuz reopens solely step by step in Q3.
Abstract: From a Citi word revealed Tuesday:
- Citi forecasts Brent crude will attain $120 per barrel within the close to time period, arguing that oil markets are presently under-pricing the danger of a chronic provide disruption and broader tail dangers from the Hormuz closure
- The financial institution’s bull-case state of affairs places Brent at $150 per barrel, premised on the Strait of Hormuz reopening solely step by step through the third quarter of 2026
- Citi’s 2027 central case sees Brent ranging between $80 and $90 per barrel, assuming Iran finally restores management of Hormuz flows and balances oil exports with demand progress expectations, implying a pointy value correction as soon as provide normalises
- The financial institution forecasts 2026 oil demand progress will contract by 0.6 million barrels per day, although it cautions that obvious demand weak point overstates actual consumption declines, as stock drawdowns and refinery cuts are masking comparatively restricted end-use demand destruction
- Citi estimates international oil inventories will draw by roughly 1 billion barrels over the course of 2026, a determine that underscores the size of the bodily provide hole created by the Hormuz disruption
Citi has forecast Brent crude will rise to $120 per barrel within the close to time period, warning in a analysis word revealed Tuesday that oil markets are materially under-pricing each the danger of a chronic provide disruption and the broader tail dangers related to the continued closure of the Strait of Hormuz.
The financial institution’s base case rests on a simple commentary: the market will not be adequately reflecting the chance that the disruption might final considerably longer than present positioning implies. With Brent buying and selling round $110 to $111, Citi’s $120 goal represents roughly 8% to 9% of further upside from present ranges, a transfer the financial institution regards as justified by provide fundamentals alone, earlier than any additional escalation premium is layered on prime.
In its bull-case state of affairs, Citi places Brent at $150 per barrel, a stage that will symbolize the best sustained crude value in historical past. That final result is premised on the Strait of Hormuz reopening solely step by step over the course of the third quarter, a state of affairs through which the bodily provide hole widens additional earlier than it begins to shut. The Strait, via which roughly a fifth of world oil provides usually passes, has been successfully closed for the reason that outbreak of the US-Israeli battle with Iran, a disruption the Worldwide Power Company has described as the most important on report.
The dimensions of the provision shock is captured in Citi’s stock forecast. The financial institution estimates international oil shares will draw by roughly 1 billion barrels over the course of 2026, a rare determine that illustrates how quickly the cushion between present provide and bodily adequacy is being consumed. At that tempo, the market’s capability to soak up additional disruption with out triggering a extra extreme value response diminishes considerably because the yr progresses.
On demand, Citi forecasts 2026 oil consumption progress will contract by 0.6 million barrels per day. Nonetheless, the financial institution cautions in opposition to studying this as proof that end-use demand has collapsed. Stock drawdowns and refinery run cuts are masking comparatively restricted destruction of precise end-user consumption, which means the obvious demand weak point flatters the underlying image and the actual supply-demand stability is tighter than headline figures recommend.
Trying additional out, Citi’s 2027 central case sees Brent settling into an $80 to $90 per barrel vary, contingent on Iran finally restoring Hormuz flows and balancing its oil exports in opposition to demand progress expectations. The hole between that outlook and the present bull case illustrates simply how binary the value path has develop into, with the timing and phrases of any Hormuz decision the only most necessary variable within the international oil market.
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Citi’s $120 near-term goal and $150 bull case symbolize a big problem to any studying of the present market as adequately priced for threat. With Brent buying and selling round $110 to $111, the financial institution’s base case implies an extra 8% to 9% upside from present ranges on provide disruption alone, earlier than any escalation premium is added. The forecast of a 1 billion barrel international stock draw this yr is probably the most hanging single determine within the word: at that tempo, the buffer between present provide situations and a real bodily scarcity compresses quickly, and the market’s capability to soak up additional disruption with no value spike diminishes with every passing week. The distinction between the 2026 bull case and the 2027 central case of $80 to $90 underscores simply how binary the outlook is, hinging virtually completely on whether or not and when the Strait of Hormuz reopens and on what phrases Iran’s oil exports resume.
