Citi Forecasts Oil Slump to $60 as Hormuz Shock Eases
C•Citi analysts forecast Brent and WTI crude oil could drop to about $60 per barrel as Strait of Hormuz supply concerns dissipate. They note recent spot market replenishments have absorbed excess cargoes, reducing near-term price volatility and pressuring energy sector margins.
1. Forecast Rationale
Citi analysts project Brent and WTI crude benchmarks will converge around $60 per barrel as supply disruptions near the Strait of Hormuz subside. The team highlights that increased spot deliveries from alternative Gulf terminals have restored inventories, undercutting recent price spikes.
2. Market Dynamics
The fading Hormuz risk has prompted traders to reprice short-term crude contracts, leading to reduced volatility in futures markets. Lower price swings could dampen speculative flows and narrow spreads between front-month and second-month futures.
3. Energy Sector Implications
A sustained move toward $60 crude could squeeze margins for oil producers and service firms, potentially curbing upstream capital budgets. Lenders with significant energy exposure may face loan demand shifts as project economics adjust to weaker price assumptions.
