Citigroup now expects Brent crude to slide as low as $60 a barrel by year-end, sharpening a bearish call Goldman Sachs and Morgan Stanley joined earlier this month. The three banks have all warned that a global oil supply glut is forming as traffic through the Strait of Hormuz recovers. Brent last traded just above $72 a barrel on July 3, after dropping almost 30 percent in the second quarter and wiping out every gain built during the four-month war.
The forecasts, all carried by Bloomberg, mark a turn from the worst oil rally since the war with Iran began in late February. An interim deal between the United States and Iran, due to be signed in Switzerland, would reopen the strait and let Iran sell its crude freely, with banks warning that supply returning from the Middle East is on track to overshoot weak demand.
Citi Says Brent Could Hit $60 by Year-End
Citigroup’s new note sets the lowest year-end target on Wall Street. Citi analysts told clients to keep selling any rally that surfaces through the summer. The price sat just above $72 a barrel on July 3, the level Bloomberg cited alongside the note.
We continue to recommend selling any summer rallies and forecast Brent reaching US$60 to US$65 a barrel by the turn of the year.
The bank’s bearishness rests on what it calls fundamentals reasserting themselves as the Hormuz disruption fades. Citi lists four drivers in the note: shipping flows normalising, Chinese buyers absent, physical crude markets weakening sharply, and inventories drawing less than expected. The bank also expects the US-Iran memorandum of understanding to evolve into a permanent deal over the coming months. The reason, in Citi’s view: the alternative to de-escalation looks worse for Washington, Tehran, and much of the Middle East.
The bank has emerged as one of the most bearish voices in the market. Morgan Stanley has joined the bearish camp with a second forecast cut in just over two weeks.
Goldman and Morgan Stanley Match the Bear Case
Morgan Stanley became the third major bank to revise lower this month. Its analysts, Martijn Rats, Charlotte Firkins, and Amy Gower, cut the third-quarter 2026 Dated Brent forecast by $15 to $75 a barrel in a note dated Monday, per Morgan Stanley’s $75 forecast for Q3 and Q4. They held their fourth-quarter call at $75, $5 a barrel below the prior estimate. Brent’s most-active September contract closed at $73.91 that day.
Goldman Sachs had already lowered forecasts earlier in the week. The bank trimmed its 2027 average for Brent to $75 from $80, and its fourth-quarter 2026 call to $80 from $90. Samantha Dart, Goldman’s co-head of global commodities research, said the assumption is that the world moves into oversupply once Hormuz flows normalize.
Traffic through the strait has begun to return. Morgan Stanley counted 35 oil and gas tankers exiting the Persian Gulf through Hormuz on Thursday, the first time the level reached the 30-to-40 range typical before the conflict began in February. The bank says the 2027 market can be balanced with Hormuz flows at only about 65 percent of the pre-conflict level. That ratio translates to roughly 11 to 12 million barrels a day.
The pullback is the steepest since the war started. The interim deal entitles Iran to sell its crude freely once it takes effect, with US-issued oil waivers due to apply immediately. Iran is also set to receive at least $300 billion in reconstruction funding from Gulf states under the agreement. Around 25 million Iranian barrels have already moved past the US blockade during the negotiation, per a separate report. The Q2 selloff erased every gain made during the war, according to a Bloomberg report. Brent’s last close below $60 was in January 2026.
| Bank | Most recent revision | Where they see Brent |
|---|---|---|
| Citigroup | New note carried by Bloomberg | $60 to $65 a barrel by year-end 2026 |
| Morgan Stanley | Second cut in two weeks | $75 a barrel for Q3 and Q4 2026 |
| Goldman Sachs | Cut earlier the same week | $80 a barrel for Q4 2026; $75 average for 2027 |
Why the Forecasts Flipped This Quarter
Three drivers show up in every bearish note from Citi, Goldman, and Morgan Stanley. The price gains from the war are unwinding as Iran agrees to reopen the strait and sell its crude without restrictions. Chinese crude buying has stayed weak during the conflict and shows no sign of returning to absorb Middle East barrels. The physical crude market has crumbled under a fresh surge of prompt supply from the region. Together, those forces have undone the war-driven rally in a single quarter.
- Iran war unwinding: The deal calls for the Strait of Hormuz to return to prewar traffic within 30 days and lets Iran sell crude without restrictions.
- Chinese demand: Chinese buyers remain absent per Citi’s note, leaving extra supply looking for homes.
- Physical crude collapse: Prompt supply from the Middle East has pushed physical prices lower.
- Lighter inventory draws: Inventories have drawn less than expected since the war began.
The market has watched the call play out in real time. Brent’s most-active contract fell to $73.91 on Monday, near a three-month low on the US-Iran deal. Around 500 ships were waiting to pass through Hormuz once insurance companies gave the all-clear.
Goldman’s Dart told Bloomberg Television that she expects exports through the strait to normalize by the end of July. Recent attacks on two vessels had set the timeline back a little, she acknowledged. Crossings had kept rising despite those incidents. Daily traffic was already back in the 30-to-40 range that defined the prewar baseline by Thursday’s count.
The Glut That Refuses to Drain
The bigger worry, the banks say, is 2027. Goldman’s Dart projects the global oil surplus to average just over three million barrels a day next year. Buying by governments to refill Strategic Petroleum Reserves is set to absorb a little over one million barrels a day of that glut.
We do expect a little over 1 million barrels a day just of SPR rebuilding globally, but still, that would leave us close to 2 million barrels a day of a surplus.
Samantha Dart, Goldman’s co-head of global commodities research, said the same in a Bloomberg Television interview this week, expecting the remaining close to two million barrels a day to land on an oversupplied market. The starting point for that surplus is a deeply drawn-down stockpile. The IEA coordinated a release of 400 million barrels from rich nations’ emergency reserves in the war’s early weeks. The US Strategic Petroleum Reserve fell from 415 million barrels at the end of February to 331 million as of June 19. That is the lowest level since 1983.
The refill alone cannot soak up the supply returning from the Middle East. Morgan Stanley’s note labels high US exports and weak Chinese imports as the twin solvers that got the market through the war. Those twin solvers are largely still in place, the bank says. To balance the 2027 market, Hormuz flows only need to hit about 11 to 12 million barrels a day, well below prewar capacity.
The bank’s broader conclusion cuts to the heart of the call. As 2027 comes into focus, Morgan Stanley’s analysts wrote, the surplus conditions that defined the start of 2026 have returned. The first quarter of 2026 had looked much the same, before the war started.
What Could Derail the Bear Call
Three risks could still upend the consensus bear case. The first is mine-clearing in Hormuz, a supply recovery that still comes in stages. Shipping sources told Reuters that mine-sweeping could take 40 to 50 days before insurers are confident enough to permit routine passage. The second is a possible transit fee on vessels, which Iran has signalled it intends to charge.
- Brent on July 3, 2026: just above $72 a barrel
- War-era peak in April 2026: above $126 a barrel
- Q2 2026 selloff: almost 30 percent, per Bloomberg
- US Strategic Petroleum Reserve as of June 19: 331 million barrels, lowest since 1983
- Goldman 2027 surplus forecast: just over 3 million bpd; close to 2 million bpd after SPR refill
The toll question is the most live. Iran has indicated it plans to charge transit fees, while US Vice President JD Vance has said he expects the strait to be opened toll-free for the long term. Goldman’s Dart said a fee on the order of $1 a barrel would not move energy prices in any material way. Her view: shipping companies care more about regulatory clarity than the dollar amount. The International Maritime Organization recorded 46 US and Iranian attacks on shipping through the conflict, a reminder that normalised traffic still carries tail risks. Goldman’s larger expectation, that exports through Hormuz will normalise by the end of July, sets the bear case’s near-term test.
Frequently Asked Questions
Why are Wall Street banks suddenly bearish on oil?
Three banks have revised their Brent crude forecasts lower within two weeks. The trigger is the Strait of Hormuz returning to normal under a US-Iran memorandum of understanding. That releases Middle East supply just as Chinese demand stays weak. The shift erases the gains built during the war that had lifted Brent above $126 a barrel in April.
What is Citigroup’s new Brent price forecast?
Citigroup expects Brent to fall to between $60 and $65 a barrel by year-end. Citi told clients to keep selling any rally that surfaces through the summer, according to a Bloomberg report. That sits below Goldman Sachs’s $80 Q4 2026 target and Morgan Stanley’s $75 call for Q3 and Q4 of 2026. It is the lowest end-of-year Brent price target on Wall Street.
How much has Brent crude already fallen?
Brent has dropped almost 30 percent in the second quarter of 2026, according to a Bloomberg report. The benchmark sat just above $72 a barrel on July 3. The Q2 selloff erased the gains from the war that had taken Brent above $126 a barrel in April. Most of the drop came as the US-Iran interim deal came into clearer view.
When will the Strait of Hormuz reopen?
The interim US-Iran deal calls for the Strait of Hormuz to return to prewar traffic levels within 30 days of signing in Switzerland. Shipping sources told Reuters that mine-sweeping could take 40 to 50 days before insurers permit routine passage. Goldman’s Samantha Dart told Bloomberg Television she expects exports through the waterway to normalize by the end of July. Traffic was already rising, with 35 tankers exiting the Persian Gulf through the strait on Thursday, the first return to the 30-to-40 prewar range.
What does Goldman’s forecast for a 3 million bpd surplus mean?
Goldman Sachs projects the global oil surplus to average just over 3 million barrels a day in 2027. The trigger is a return to normal Hormuz traffic. Buying to refill the US Strategic Petroleum Reserve and other emergency stockpiles is expected to absorb a little over 1 million barrels a day. The remaining close to 2 million barrels a day would still land on an oversupplied market. For consumers, that should mean cheaper fuel; for producers and refillers, weaker prices and thinner margins.
Disclaimer: This article reports third-party forecasts from Citigroup, Goldman Sachs, and Morgan Stanley. Forecasts are not guarantees. Oil price movements affect consumers, producers, and investors; consult a qualified financial professional before making investment decisions. Figures are accurate as of publication.
