Citi expects brent crude to slide towards $60 a barrel by year-end as geopolitical tensions around the Strait of Hormuz ease, Bloomberg reported.Global energy markets are gradually returning to normal as shipping through the Strait of Hormuz resumes, improving near-term crude supplies after refiners scrambled to secure alternative sources during the conflict. As supply concerns eased, oil prices tumbled, with Brent crude erasing all the gains made during the war after a 30% fall.

“Fundamentals are showing strength again,” Citigroup analysts were quoted as saying by Bloomberg.

The brokerage, however, noted that even with the shipping flows returning to normal, Chinese buyers are still missing from the market, leading to weakness in the physical crude market. Further, inventories are currently lower than expected.

Analysts at Citi said the initial return to normal market conditions could be uneven as shipping routes, insurance costs and logistics gradually stabilise.

Rising traffic and organised shipping patterns show that market participants now see the risk as manageable rather than disruptive.

“We continue to recommend selling any summer rallies and forecast Brent reaching $60 to $65 a barrel by the turn of the year,” Citi analysts said.

Other global banks have taken a similar view, Bloomberg stated.

Goldman Sachs expects the global oil market to slip back into surplus as the impact of the Iran conflict fades and shipping through the Strait of Hormuz normalises. Morgan Stanley has also lowered its oil price forecasts twice in recent weeks, warning of an emerging supply glut, the news agency added.

Oil prices edged higher on Friday as investors remained cautiously optimistic about ongoing peace efforts between the United States and Iran. Brent crude rose to $72.26 a barrel, while US crude climbed to $69.01 a barrel, Reuters reported.

Crude supply picks up pace
The reopening of the Strait of Hormuz has eased concerns over global oil supplies, with Gulf producers steadily ramping up output and exports as shipping returns to normal.

Kuwait sharply increased oil production in June, while Saudi Arabia boosted exports by sending more supertankers through the key shipping route and switching to spot pricing to speed up sales in Asia, Reuters reported.

“It’s a case of guarded optimism, with the market wanting to believe the peace efforts will hold, but it is still hedging its bets until it sees real evidence on the water,” Tim Waterer, Chief Market Analyst at KCM Trade, was quoted as saying by the news agency.

Higher crude exports from Gulf producers have increased oil supply at a time when concerns over supply disruptions are easing. According to Reuters, with more oil entering the market, expectations of excess supply have grown. As a result, the market has moved into a situation where oil prices for future delivery are higher than current spot prices.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times)