- Mainstream Wall Street investment banks, including Citigroup (C:US), have joined the bearish camp on the oil market. Their latest report predicts that Brent crude oil prices may further decline to $60 per barrel by the end of this year. As shipping disruptions in the Strait of Hormuz gradually subside and the US and Iran sign a memorandum of understanding, the global energy supply chain and shipping traffic are rapidly returning to normal.
- With Chinese crude oil buyers yet to make a significant return and the global spot market noticeably weakening, Brent crude oil futures plummeted by 30% in the second quarter, completely erasing all gains made during the Middle East conflict. Currently, apart from a few institutions like HSBC maintaining an optimistic outlook, Goldman Sachs (GS:US) and Morgan Stanley (MS:US) have frequently lowered their oil price forecasts and warned of future oversupply risks.
- Leading commodity analysts point out that against the backdrop of slowing global crude oil demand growth, the continuous release of the US Strategic Petroleum Reserve (SPR) has exacerbated short-term oversupply pressure. Analysts generally advise investors to sell during market rebounds in the summer and emphasize that future oil pricing will once again be dominated by fundamental supply and demand relationships.
Hormuz Shipping Resumption Reshapes Supply Landscape
With the signing of a memorandum of understanding between the US and Iran, the Strait of Hormuz, previously blocked due to conflict, has now resumed navigation. Commercial shipping operators generally assess the current risk as manageable, and the continuous increase in shipping traffic is allowing global refineries to regain stable crude oil supplies. Citigroup analysts point out that although residual logistical bottlenecks and insurance market repricing will take time to digest, the worst period on the supply side is over.
Mainstream Wall Street Investment Banks Lower Oil Price Expectations
In the context of fundamentals rapidly regaining control of the market, major Wall Street institutions have turned pessimistic. Goldman Sachs clearly states that after the effects of the war fade, the global crude oil market will once again face a state of oversupply. Morgan Stanley has also lowered its oil price forecasts twice in the short term. Currently, Brent crude oil futures are fluctuating around $72 per barrel, and institutions like Citigroup believe the probability of oil prices testing the $60 to $65 per barrel range by the end of the year is significantly increasing.
Weak Demand Side Triggers Downward Market Pressure
Another main reason for the noticeable weakening of the spot crude oil market is the failure of traditional major consumer countries' demand to rebound as expected. Data shows that Chinese buyers have yet to return to the market for large-scale purchases, resulting in a decline in global commercial crude oil inventories far below previous market expectations. Institutions like SEB point out that if Chinese crude oil demand does not show substantial improvement, the space for technical rebounds will be severely constrained.
Divergent Institutional Views and Future Variables
Compared to the bearish consensus of most investment banks, HSBC remains relatively optimistic about the future. HSBC believes that the additional supply from the return of Middle Eastern supply is expected to be gradually absorbed by the market through global inventory replenishment. Furthermore, the International Energy Agency (IEA) is expected to stop releasing strategic oil reserves in July, at which point the slight oversupply phenomenon may dissipate. If macro demand improves, there is still a theoretical possibility for Brent oil prices to return to $80 per barrel.
