Citi has revised its oil price forecast to $60 to $65 despite improved crude oil exports from the Gulf. The bank reported that December futures for Brent have reached $111.70, and on Thursday, with an increase of $2.88, it has risen by 2.65 percent.
Challenges of Crude Oil Transportation
Citi stated that transporting oil from the Gulf to buyers incurs varying costs. In September, over one million barrels of crude oil were transferred from the Gulf between ships, accounting for about 7.5 percent of the region's exports. Before the U.S.-Iran war, such transfers were almost nonexistent.
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Increase in Transportation Costs
The transportation cost for large crude oil tankers on the route from the Gulf to China has reached nearly $250 per metric ton, which is approximately $35 per barrel. This cost is more than 20 times the average of the past decade. Crude oil exports from the Gulf, excluding Iran, reached over 81 percent of pre-war levels in September due to increased exports from Saudi Arabia. Meanwhile, Iran's exports have dropped to zero under U.S. sanctions.
Before the war began in February, the Strait of Hormuz managed about one-fifth of the world's liquid natural gas and oil supplies. Citi has repeatedly had to revise its forecasts for the oil market. In July, the bank advised investors to sell on summer increases and predicted that Brent prices would drop to $60 to $65 by the end of the year.
In August, Citi raised its Brent price forecast for the third quarter from $75 to $80 but maintained its fourth-quarter forecast at $70 and $65 for 2027. While Brent was trading at $83.11 at the time of this revision, Citi did not provide a new price target in its Thursday assessment, only warning that the improvement in Gulf exports means an improvement in volumes, not transportation efficiency.
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