Citi has forecast that Brent crude will rise to $120 per barrel in the near term. Furthermore, the bank warns that oil markets are materially under-pricing current risks. Specifically, traders are ignoring the danger of a prolonged supply disruption. This threat stems directly from the ongoing closure of the Strait of Hormuz. According to a research note published on Tuesday, Citi considers these broader tail risks significant.
The bank’s base case relies on current market positioning data. Currently, this data does not adequately reflect the possibility of extended supply disruptions. With Brent trading around $110-$111, reaching $120 represents an 8% to 9% increase from current levels. Consequently, Citi believes that supply fundamentals alone fully justify this upward move.
Bull-Case Scenario: Oil Could Hit $150
In its bull-case scenario, Citi projects that Brent crude could hit $150 per barrel. Notably, this level would mark the highest sustained price in history. This aggressive forecast assumes that the Strait of Hormuz will reopen only gradually during Q3 2026.
The closure of this strategic waterway began with the US-Israeli conflict with Iran. Since then, it caused a massive supply shock. This happened because approximately one-fifth of global oil supplies normally pass through it.
Rapid Inventory Drawdowns and Supply Risks
Additionally, Citi estimates that global oil stocks could draw down by about 1 billion barrels over 2026. This substantial inventory reduction underscores a dangerous trend. Specifically, the market’s cushion against physical shortages is eroding rapidly. As a result, any further disruption might trigger more severe price reactions later this year.
On the demand side, Citi forecasts a contraction in oil consumption growth by 0.6 million barrels per day in 2026. However, this shift does not indicate a total collapse of end-use demand. Instead, massive inventory drawdowns and refinery run cuts are simply masking the true consumption numbers. Consequently, actual end-user demand destruction remains relatively limited.
Market Outlook and 2027 Projections
Looking ahead to 2027, Citi’s central case sees Brent settling into an $80-$90 per barrel range. However, this outlook remains strictly contingent on Iran restoring Hormuz flows.
The massive gap between this baseline and the current bull-case scenario highlights a highly binary price path. Ultimately, the timing and terms of any resolution at the Strait of Hormuz will remain critical for global markets.
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