Oil prices could fall to $60 per barrel as early as this year
Oil prices could drop significantly by the end of 2025. Citigroup forecasts that the price of Brent could drop to $60 per barrel as the situation with shipping through the Strait of Hormuz gradually stabilizes and talk of an oil surplus resurfaces in the market.
According to the bank’s experts, following tensions in the Middle East, the market is gradually returning to normal. While traders previously feared supply disruptions through the Strait of Hormuz, these risks are now subsiding, and attention is shifting back to the balance between supply and demand. Analysts note that fundamental factors have once again begun to drive the situation in the oil market. “Fundamental factors are quickly coming to the forefront again. Shipping flows are normalizing, Chinese buyers are staying on the sidelines, physical oil markets have weakened sharply, and inventories have declined much less than expected,” Citi stated.
The bank explains that the resumption of normal shipping traffic through the Strait of Hormuz is increasing short-term oil supply. In addition, many refineries have already managed to find alternative suppliers during the period of greatest uncertainty. As a result, prices began to fall rapidly. According to Citi’s estimates, Brent fell by about 30% in the second quarter and effectively lost all the gains it had made during the escalation of the conflict in the Middle East.
However, analysts warn that the market’s return to normal will not be entirely smooth. Prices may still fluctuate sharply for some time. “The first stage of normalization will be volatile as shipping routes return to normal, insurance markets adjust, and logistical constraints gradually ease,” Citi notes.
Other major financial institutions share similar forecasts. In particular, Goldman Sachs also expects the global oil market to gradually shift to a surplus, meaning supply will exceed demand. Morgan Stanley has also revised its expectations. Over the past few weeks, the bank has lowered its oil price forecast twice, citing the growing risk of oversupply in the global market.
If these forecasts come true, cheaper oil could affect not only the energy sector but also the global economy as a whole. A decline in the price of crude oil often affects fuel prices, the revenues of oil-exporting countries, and conditions in financial markets. Bloomberg reports this, citing a forecast by Citi analysts.
As of July 2, global oil prices had fallen by nearly 1% and continued to decline for the third consecutive day. The market reacted to Qatar’s statement regarding progress in indirect talks between the U.S. and Iran concerning the situation in the Strait of Hormuz.
