Citi Lifts Brent Outlook but Still Sees Oil Falling in 2027

Citigroup has raised its third-quarter 2026 Brent crude forecast to $80 per barrel from $75, citing the prolonged U.S.-Iran conflict and continued constraints on oil flows through the Strait of Hormuz. The bank left its fourth-quarter 2026 forecast unchanged at $70 per barrel and continues to project an average of $65 per barrel for full-year 2027.

The revision reflects a five-month war that has lasted longer than Citi anticipated. Repeated attempts at a deal have failed to fully restore normal shipping through the Strait of Hormuz, a chokepoint that handles roughly one-fifth of global seaborne oil trade. Middle East production remains well below pre-war levels, and attacks on commercial vessels have persisted. The conflict removed millions of barrels per day from the market earlier in 2026, supporting higher prices in the second quarter.

Citi still expects an eventual resolution. Its Q4 2026 $70 forecast assumes more barrels eventually move through Hormuz. This marks a partial retreat from the bank’s more aggressively bearish stance earlier in the summer, when it recommended selling summer rallies and saw Brent potentially falling to $60–$65 by year-end as flows normalized. Citi’s December 2025 outlook had projected a full-year 2026 average of just $62, with a bearish case of $50 and a bullish case of $75 if geopolitical disruptions materialized—which they did.

Brent futures were trading around $81–$83 in early August 2026 amid lingering negotiation concerns and weak U.S. employment data, after briefly dipping below $80 earlier in the week on hopes for a Hormuz agreement.

What Other Analysts Are Saying

Wall Street views diverge on the near-term path but broadly converge on lower prices once geopolitical risks ease.

Goldman Sachs has been less convinced of a sharp Q4 drop. Earlier in the week of Citi’s revision, Goldman indicated Brent should remain in an $80–$90 range until there is confirmation of a U.S.-Iran agreement or significant escalation, with upside potential toward $120 if Hormuz stays constrained longer. In prior notes, Goldman had lowered its 2027 average to around $75–$80 (from higher levels), citing stronger non-OPEC supply growth from the U.S., Brazil, Guyana, Venezuela, and the UAE, alongside structural demand weakness—particularly China’s shift toward alternatives such as electric vehicles. It has flagged potential 2027 surpluses near 3 million barrels per day (bpd) even after accounting for strategic petroleum reserve rebuilding.

Morgan Stanley has taken a more bearish stance, cutting forecasts multiple times. It has projected Dated Brent averaging around $75 in the second half of 2026 and closer to $70 by the end of 2027, arguing that faster Hormuz reopening would accelerate a return to surplus amid strong U.S. supply and weak Chinese demand.

JPMorgan has projected averages near $86 in Q3 2026 and $80 in Q4, exiting the year around $78, with a 2027 average near $64. It expects oversupply in late 2026/early 2027 that could require production curtailments.

The U.S. Energy Information Administration (EIA) has forecast Brent averaging about $65 in 2027 as global production rebounds and inventory builds resume. The International Energy Agency (IEA) has projected a significant supply surplus in 2027—potentially several million bpd—after Gulf flows recover, with supply growth outpacing demand.

Consensus across major banks points to 2027 Brent averages generally in the $65–$80 range under base-case assumptions of eventual normalization, well below crisis peaks.

Why Would Oil Prices Fall in 2027? (Not Primarily Refining Capacity)The expected decline is driven by a return to underlying supply-demand fundamentals after the war premium fades—not by a shortage of refining capacity. In fact, the opposite dynamics are at play on the crude side.

Once Strait of Hormuz flows and Middle East production normalize (or approach pre-war levels), a large volume of previously disrupted barrels returns to the market. Pre-war, the strait handled roughly 20 million bpd of oil flows; disruptions cut Middle East liquids output by more than 10 million bpd at peaks, with cumulative losses in the billions of barrels. Recovery, combined with continued growth from non-OPEC producers (U.S. shale, Brazil, Guyana, and others) and potential OPEC+ adjustments, is projected to create substantial surpluses—estimates range from roughly 3 million bpd (Goldman) to over 5 million bpd in some IEA-linked views for 2027.

Demand growth is expected to remain modest. War-related demand destruction (especially in Q2 2026) has lingered in some regions, Chinese crude imports have been weak amid electrification and efficiency gains, and structural shifts (EVs, alternatives) persist. Inventory rebuilding (including strategic stocks) will absorb some barrels but is widely viewed as insufficient to offset the surplus.

Refining capacity is not the primary driver of the projected crude price decline. Near-term, Middle East refining ramp-ups and residual logistical bottlenecks have supported product margins as product supply lagged crude availability in some periods. Global refining utilization and capacity additions (particularly in Asia, the Middle East, and Africa) are expected to continue, but the core pressure on crude prices stems from excess crude supply relative to demand once geopolitical constraints ease. Analysts emphasize “weaker underlying fundamentals” and a market “coming full circle—back to surplus.”

In short, Citi and peers see 2027 as a year when the market re-anchors to abundant supply and tempered demand growth after the extraordinary disruption of 2026. Risks remain two-sided: prolonged Hormuz issues could keep prices higher for longer, while faster recovery plus stronger non-OPEC output or weaker demand could push them lower still.

This analysis is based on publicly reported bank notes and agency outlooks as of early August 2026. Markets remain highly sensitive to diplomatic developments between the U.S. and Iran.