Brent Crude prices could plunge to as low as $60 per barrel by the end of the year, according to the latest note from Citi's commodity research team which expects flows through the Strait of Hormuz to soon normalize and the US and Iran to reach a deal in the coming months.
"Fundamentals are rapidly reasserting themselves as Hormuz disruptions fade, with Brent back to the low $70s/bbl. While the US-Iran process remains fragile and disputes over Hormuz administration and transit fees persist, we expect the MOU to hold and turn into a deal over the coming months as incentives to de-escalate outweigh the alternative for the US, Iran, and much of the ME region. Shipping flows are normalizing, Chinese buyers remain absent, physical crude markets have weakened sharply, and inventories have drawn far less than expected," Citi’s Francesco Martoccia wrote in his latest note.
"We continue to recommend selling any summer rallies and forecast Brent reaching $60 to $65 a barrel by the turn of the year," Citi analysts said in the note (available to pro subs).
The investment bank has traditionally been one of the most bearish voices in the market, and especially now that it expects shipping through Hormuz to normalize now that the Strait is open again. Moreover, China’s crude buying remains weak, physical prices have crumbled due to the surge of prompt supply from the Middle East, while “inventories have drawn far less than expected,” Citi said.
Inventories, including in the United States, have crashed to
