Citi forecasts Brent crude will reach $120 per barrel near term, warning oil markets are under-pricing prolonged supply disruption risk, with a bull case of $150 if Hormuz reopens only gradually in Q3.
Summary: From a Citi note published Tuesday:
- Citi forecasts Brent crude will reach $120 per barrel in the near term, arguing that oil markets are currently under-pricing the risk of a prolonged supply disruption and broader tail risks from the Hormuz closure
- The bank’s bull-case scenario puts Brent at $150 per barrel, premised on the Strait of Hormuz reopening only gradually during the third quarter of 2026
- Citi’s 2027 central case sees Brent ranging between $80 and $90 per barrel, assuming Iran ultimately restores control of Hormuz flows and balances oil exports with demand growth expectations, implying a sharp price correction once supply normalises
- The bank forecasts 2026 oil demand growth will contract by 0.6 million barrels per day, though it cautions that apparent demand weakness overstates real consumption declines, as inventory drawdowns and refinery cuts are masking relatively limited end-use demand destruction
- Citi estimates global oil inventories will draw by approximately 1 billion barrels over the course of 2026, a figure that underscores the scale of the physical supply gap created by the Hormuz disruption
Citi has forecast Brent crude will rise to $120 per barrel in the near term, warning in a research note published Tuesday that oil markets are materially under-pricing both the risk of a prolonged supply disruption and the broader tail risks associated with the ongoing closure of the Strait of Hormuz.
The bank’s base case rests on a straightforward observation: the market is not adequately reflecting the possibility that the disruption could last significantly longer than current positioning implies. With Brent trading around $110 to $111, Citi’s $120 target represents approximately 8% to 9% of additional upside from current levels, a move the bank regards as justified by supply fundamentals alone, before any further escalation premium is layered on top.
In its bull-case scenario, Citi puts Brent at $150 per barrel, a level that would represent the highest sustained crude price in history. That outcome is premised on the Strait of Hormuz reopening only gradually over the course of the third quarter, a scenario in which the physical supply gap widens further before it begins to close. The Strait, through which approximately a fifth of global oil supplies normally passes, has been effectively closed since the outbreak of the US-Israeli conflict with Iran, a disruption the International Energy Agency has described as the largest on record.
The scale of the supply shock is captured in Citi’s inventory forecast. The bank estimates global oil stocks will draw by approximately 1 billion barrels over the course of 2026, an extraordinary figure that illustrates how rapidly the cushion between current supply and physical adequacy is being consumed. At that pace, the market’s ability to absorb further disruption without triggering a more severe price response diminishes significantly as the year progresses.
On demand, Citi forecasts 2026 oil consumption growth will contract by 0.6 million barrels per day. However, the bank cautions against reading this as evidence that end-use demand has collapsed. Inventory drawdowns and refinery run cuts are masking relatively limited destruction of actual end-user consumption, meaning the apparent demand weakness flatters the underlying picture and the real supply-demand balance is tighter than headline figures suggest.
Looking further out, Citi’s 2027 central case sees Brent settling into an $80 to $90 per barrel range, contingent on Iran eventually restoring Hormuz flows and balancing its oil exports against demand growth expectations. The gap between that outlook and the current bull case illustrates just how binary the price path has become, with the timing and terms of any Hormuz resolution the single most important variable in the global oil market.
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Citi’s $120 near-term target and $150 bull case represent a significant challenge to any reading of the current market as adequately priced for risk. With Brent trading around $110 to $111, the bank’s base case implies a further 8% to 9% upside from current levels on supply disruption alone, before any escalation premium is added. The forecast of a 1 billion barrel global inventory draw this year is the most striking single figure in the note: at that pace, the buffer between current supply conditions and a genuine physical shortage compresses rapidly, and the market’s ability to absorb further disruption without a price spike diminishes with each passing week. The contrast between the 2026 bull case and the 2027 central case of $80 to $90 underscores just how binary the outlook is, hinging almost entirely on whether and when the Strait of Hormuz reopens and on what terms Iran’s oil exports resume.
