Citi Raises Brent Forecast to $80, Cites US-Iran Conflict; Maintains Bearish Long-Term View

Citigroup has revised its short-term oil price forecast upwards, now expecting Brent crude to reach $80 per barrel in the third quarter, a $5 increase from its previous projection of $75. This adjustment stems from the persistent US-Iran conflict, which continues to impede oil supplies and hinder efforts to secure safe passage through the Strait of Hormuz.

However, the bank's medium-term outlook remains cautious. Citigroup has kept its fourth-quarter Brent forecast at $70 per barrel and anticipates an average price of $65 per barrel in 2027. This reflects a broader bearish sentiment regarding oil prices in the coming years.

Oil markets experienced a surge in prices over the weekend, with Brent crude trading at $83.11 and West Texas Intermediate (WTI) at $77.80. This uptick was fueled by renewed uncertainty surrounding US-Iran negotiations. Earlier in the week, prices had dipped below $80 on expectations of a potential agreement concerning the Strait of Hormuz.

The bank's earlier position in July advised investors to sell into summer rallies, forecasting a potential decline in Brent crude to $60-$65 by year-end. This was based on anticipated recovery in shipping through the Strait of Hormuz and progress towards a wider US-Iran agreement. However, the conflict has now persisted for five months, severely restricting shipping and keeping Middle Eastern oil output below pre-war levels, with continued attacks on commercial vessels.