Citi said that it expects Brent crude oil prices to rise to $120 per barrel in the short term, citing that oil markets are underestimating the risk of a prolonged supply disruption.
Under a best-case scenario, the bank sees Brent crude reaching $150 per barrel, assuming a gradual resumption of shipping through the Strait of Hormuz in the third quarter.
Oil prices fell on Tuesday after Vice President J.D. Vance announced progress in negotiations between the US and Iran, emphasizing that neither side is interested in a resumption of hostilities.
Brent crude futures for July delivery closed lower on Tuesday at $111.28 per barrel. According to Citi, the oil price forecast for 2027 is difficult to estimate, but the bank's baseline scenario assumes a range of $80–$90 per barrel, assuming Iran maintains control over flows through the Strait of Hormuz and balances oil exports with expectations of demand growth.
Citi forecasts a contraction in global oil demand growth in 2026 of 0.6 million barrels per day. The bank noted that the apparent weakness in demand likely exaggerates the actual decline in consumption, as inventory drawdowns and lower refinery utilization mask a relatively limited disruption to final demand.
The bank estimates that global oil inventories will decline by approximately 1 billion barrels this year.