Citigroup stated on Tuesday that it anticipates Brent crude prices will rise to $120 per barrel in the near term, noting that the oil market is underestimating prolonged supply disruptions and broader tail risks.
The bank outlined a bullish scenario where Brent crude could reach $150 per barrel, contingent upon the Strait of Hormuz gradually reopening in the third quarter.
Oil prices closed lower on Tuesday following remarks from Vice President Vance, who indicated progress in U.S.-Iran negotiations and a mutual desire to avoid renewed military action.
The July Brent crude futures contract settled at $111.28 per barrel on Tuesday.
Citigroup acknowledged the extreme difficulty in forecasting oil prices for 2027 but provided a base case projection of Brent crude fluctuating between $80 and $90 per barrel. This scenario assumes Iran maintains control over oil flows through the Strait of Hormuz and balances its oil exports with expected demand growth.
The bank forecasts a contraction in global oil demand growth by 600,000 barrels per day in 2026. It suggested that apparent weak demand may overstate the actual decline in consumption, as inventory drawdowns and refinery run cuts have masked relatively limited end-user demand destruction.
Citigroup expects global crude inventories to decrease by approximately 1 billion barrels this year.
"We estimate that the majority of these inventory draws will occur outside of China, with non-Chinese stocks trending toward the lows seen in the 2011-2014 period," Citigroup stated.
While maintaining a positive short-term outlook, the bank noted that current market conditions would need to persist for another six to nine months for inventory levels outside China to potentially fall to levels comparable to those during the second oil crisis.
Regarding natural gas, Citigroup maintained its price forecast for the U.S. Henry Hub, citing robust production. However, it highlighted upside risks for European and Asian prices, projecting that TTF prices could average around $17.8 per million British thermal units if supply disruptions continue.
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