Citibank: After the risk in Hormuz subsides, oil prices may fall toward $60.

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Brent crude oil prices are facing further downward pressure, with bank analysts predicting it may fall to $60 per barrel within the year.

On Friday, Citigroup predicted in a research report that as the situation in the Strait of Hormuz normalizes, Brent crude oil will drop to the $60-65 per barrel range by the end of the year. The bank recommends traders short-selling during the summer price rebound. Meanwhile, Goldman Sachs and Morgan Stanley have also successively lowered their oil price forecasts, with bearish opinions continuing to converge among major Wall Street institutions.

Citi analysts Francesco Martoccia and others wrote in the report: "Fundamentals are rapidly returning to dominate the market. Shipping flows are normalizing, the physical crude oil market has softened significantly, and inventory consumption is far below expectations."

On Friday, Brent crude was reported at $71.57 per barrel, a sharp pullback from the peak of over $126 per barrel reached on April 30—its highest level since 2022. The January futures contract is around $73 per barrel, indicating Citi's forecast still has significant downward space compared to current market pricing.

Ceasefire Agreement Expected to Continue; Declining Risk Premium is Core Logic Behind Oil Price Downturn

Citi’s core premise for its bearish outlook on oil prices is that the US-Iran ceasefire agreement will remain effective. In mid-June this year, the US and Iran signed a memorandum of understanding (MOU), announced a suspension of hostile actions, and since then, Brent crude oil prices have stayed below $80 per barrel.

Citi analysts pointed out in the report that, despite possible brief friction, both parties have sufficient motivation to maintain the agreement. "We expect the MOU to hold and convert into a formal agreement in the next few months because, for the US, Iran, and most Middle Eastern regions, incentives to ease tensions far outweigh those for confrontation."

The report also states: "Both the US and Iran are showing signs of genuine conflict fatigue, and Lebanon—a potential source of disruption—has been increasingly constrained by the broader US preference for de-escalation."

Hormuz Shipping Resumes, Supply Pressure Rebuilds Rapidly

The Strait of Hormuz is the key corridor for Persian Gulf oil producers to reach global markets. According to Citi analysts, the strait was doubly blocked during the conflict; oil shipments passing through it have now rebounded to 7 million barrels per day, compared to 15 million barrels per day before the conflict.

Analysts also pointed out that, due to many vessels switching off their Automatic Identification System (AIS) transponders for safety reasons, actual shipping volumes may be higher than official data reflects. Citi describes the current transition phase as "expectedly noisy," as shipping routes, insurance markets, and logistical bottlenecks continue to adjust. However, they emphasize, "The organized sailing patterns and rising flows indicate commercial operators increasingly see the current risk environment as controllable and not insurmountable."

According to Bloomberg, some major European countries currently accept that ships crossing the Strait of Hormuz must pay fees to Iran and Oman.

Multiple Institutions Bearish In Sync; Market Supply and Demand Balance Tilting Toward Surplus

Citi's pessimistic forecast is not isolated; other major institutions are also simultaneously revising their outlooks downward. Goldman Sachs lowered its Brent crude forecast for year-end to $80 per barrel in mid-June, and its commodity team noted that Persian Gulf oil flows may recover to pre-war levels as early as the beginning of July. They expect the global oil market will return to a supply surplus as the Iran war’s impact fades and Strait of Hormuz flows recover. Morgan Stanley has twice lowered its oil price forecast in recent weeks, highlighting the risk of supply surplus.

However, Goldman Sachs analysts remain more cautious than Citi in assessing Iran's willingness to maintain the ceasefire.

Citi analysts conclude that as supply recovers and demand weakens, "fundamentals are rapidly returning to dominate the market," and Brent crude oil has fallen around 30% in the second quarter, erasing all gains during the conflict period.

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