Citi’s $60 Oil Call Meets $112 Brent

Citi had predicted Brent would fall to $60–$65 by year-end. Instead, December Brent futures traded at $111.70, showing a gap of about $47 to $52 per barrel. The difference is large because Citi’s forecast implied a major price decline, while the reported market price was above $110.

The comparison shows how quickly the oil outlook changed. A $112 price is about 1.7 to 1.9 times Citi’s earlier forecast range. The bank made that forecast when it expected shipping through the Strait of Hormuz to normalize and summer price rallies to fade.

Citi later became less bearish. Gulf exports recovered in volume, but costly vessel transfers and freight rates kept delivered crude expensive. Citi gave no new price target in Thursday’s assessment, but warned that shipping problems created more upside risk for oil prices.

Brent crude is a light, relatively low-sulfur oil associated with production in the North Sea. Brent futures are exchange-traded contracts whose prices reflect expected Brent crude values for specified future delivery months. The article reports December Brent futures at $111.70, rather than quoting a physical cargo price.

Brent serves as a global benchmark because traders use it as a common reference for many crude grades. Producers, refiners, and financial markets can price contracts relative to it. Its futures market also provides a public, continuously updated signal about oil supply, demand, transport, and geopolitical risks.

The article uses Brent to show how the market outlook changed. Citi once expected Brent to reach $60–$65 by year-end. Yet December futures traded near $112 as expensive Gulf shipping and disrupted routes raised concern about the cost of delivering crude.

Citi originally expected oil prices to fall as shipping through the Strait of Hormuz normalized. In July, it told investors to sell summer rallies and forecast Brent at $60–$65 by year-end. That view assumed recovering exports would translate into smoothly delivered supplies.

The key mechanism proved different. Gulf crude volumes recovered, but logistics did not. More than 1 million barrels per day changed vessels in September, and very large crude carrier freight from the Gulf to China approached $250 per metric ton, or about $35 per barrel. Transfers and freight costs made delivered oil unusually expensive.

Citi therefore warned about more upside risk instead of repeating its earlier bearish call. Excluding Iran, Gulf exports rose above 81% of prewar levels, but Iran’s exports fell to zero. The bank offered no new price target, stressing that volume recovery was not shipping-efficiency recovery.

Citi’s distinction separates oil production and export volume from the quality of transportation. Gulf countries were sending more crude out, so headline export numbers improved. But the shipping system was still strained, meaning cargoes did not reach buyers through normal routes, schedules, or costs.

The clearest example was vessel-to-vessel transfer. More than 1 million barrels per day of Gulf crude changed ships in September, equal to about 7.5% of regional exports. Freight for very large crude carriers traveling from the Gulf to China approached $250 per metric ton, or roughly $35 per barrel.

That is why Citi called the recovery inefficient. Excluding Iran, Gulf exports exceeded 81% of prewar levels, but Iran’s exports were zero under a U.S. blockade. Buyers received more crude, yet the added handling and freight kept delivered supplies expensive, preserving upside risk for prices.

Transferring crude between vessels is a workaround for disrupted shipping. Instead of relying on one tanker to complete a normal Gulf-to-buyer journey, cargo can be moved to another ship better positioned to continue the trip. This can keep oil flowing even when standard routes, ports, or vessel availability are constrained.

The article gives a striking example. More than 1 million barrels per day of Gulf crude was transferred between vessels in September. Such transfers were virtually nonexistent before the U.S.-Iran war. They represented about 7.5% of regional exports, showing that this was a significant emergency logistics response.

The alternative is useful, but not efficient. Each additional transfer can require more coordination and handling. Meanwhile, freight for very large crude carriers from the Gulf to China approached $250 per metric ton, or about $35 per barrel. Buyers received crude, but delivery became much more expensive.

The figures show a disruption that was both large in volume and severe in cost. More than 1 million barrels per day of Gulf crude was transferred between vessels in September. That represented about 7.5% of regional exports, so the workaround involved a meaningful share of the trade.

The cost shock was even more dramatic. Freight for very large crude carriers traveling from the Gulf to China approached $250 per metric ton, which Citi estimated at roughly $35 per barrel. The article says this was more than 20 times the previous decade’s average. Transport alone therefore became a major part of delivered crude’s price.

The disruption did not stop all exports. Excluding Iran, Gulf exports recovered to more than 81% of prewar levels. But cargoes moved through expensive transfers and freight markets, so higher export volumes did not restore normal supply costs.

A major chokepoint concentrates trade through a narrow and important route. If that route becomes risky or difficult to use, producers may still have oil available, but moving it to buyers becomes slower, less predictable, and more expensive. Markets price that delivery risk, not just the amount produced.

The article shows this mechanism through the Strait of Hormuz. Before the war began in February, it handled about one-fifth of the world’s oil and LNG supplies. Afterward, more than 1 million barrels per day of Gulf crude was transferred between vessels, while freight from the Gulf to China approached $35 per barrel.

Thus, export volumes could recover without restoring normal supply. Excluding Iran, Gulf exports exceeded 81% of prewar levels, but Iran’s exports fell to zero under a U.S. blockade. Costly logistics kept delivered crude expensive and led Citi to see more upside risk for prices.

The main consequence is a higher delivered cost for oil. Gulf producers may continue exporting large volumes, but buyers must absorb extra transfers, scarce tanker capacity, and unusually high freight. That can support oil prices because the market values usable, delivered supply rather than barrels that are difficult or costly to transport.

The article’s numbers show the pressure. Freight from the Gulf to China approached $250 per metric ton, or roughly $35 per barrel, more than 20 times the previous decade’s average. More than 1 million barrels per day also moved between vessels. These costs add to the expense of getting crude to refining centers.

Refiners could face higher input costs or seek alternative supplies, while consumers could feel the effect through more expensive fuels and energy. The article does not quantify those downstream effects. It does show Citi warning of more upside risk and declining to issue a new price target.