Brent Touches $112.68 as Citi Drops Its $60-65 Year-End Call and Flags Gulf Shipping Costs

December Brent crude futures traded at $111.70 a barrel on Thursday, Oct. 22, up $2.88, or 2.65%. During the session they touched $112.68. U.S. West Texas Intermediate was near $98 in early Asian trading, up about 1%.

The move cuts hard against the forecast Citi published in July. The bank then expected Brent to fall to $60-65 by the end of the year as shipping through the Strait of Hormuz normalized.

It did not happen. In August, Citi lifted its third-quarter forecast from $75 to $80 a barrel but left its fourth-quarter estimate at $70 and its 2027 estimate at $65. Citi has not named a new price target. It has said that higher export volumes have not eliminated high logistics costs, and OilPrice reports the bank now sees upside risk to crude.

Barrels are moving, but getting them to buyers costs far more

Citi's argument is that the recovery in Middle East exports does not mean delivery has normalized. By the bank's estimate, freight rates for very large crude carriers on the Persian Gulf-to-China route were approaching $250 per metric ton, or about $35 per barrel. That is more than 20 times the average of the previous decade.

In September, more than 1 million barrels a day were transferred between vessels in the region, about 7.5% of regional exports. Such transfers were virtually unheard of before the U.S.-Iran war, according to the same Citi analysis.

Excluding Iran, Persian Gulf oil exports recovered to more than 81% of their pre-war level in September, helped by higher Saudi supplies. Iranian exports fell to zero because of the U.S. blockade.

The case that supply is holding up

There is data pointing the other way. Kpler figures showed on Tuesday that the seven-day average of oil flows out of the Middle East, counting Hormuz, the Red Sea and the Gulf of Oman, was just over 24 million barrels a day. That is above the pre-war average.

Tanker crossings through the strait itself remain well below pre-war levels. Restored Saudi pipeline exports have made up the difference and helped keep a lid on prices.

Crude has also stayed well short of the $200 a barrel that some analysts predicted when the war began.

Fatih Birol, executive director of the International Energy Agency, said that framing misses the point. "We don't use crude oil, we use products," he told the Financial Times Energy Transition Summit in London on Tuesday. He noted that diesel prices have roughly doubled from pre-war levels, driven largely by the Iran war and partly by attacks on Russian refineries.

Birol called a crude-only read of the crisis "myopic." He added that diesel demand typically rises this time of year while many large refineries have planned maintenance.

Hormuz, the Houthis and Iran

The strait carried a fifth of the world's oil and natural gas supply before the war. "The Strait of Hormuz has been closed once, it can be closed again," Birol said. "I don't see any credible pathway that 2027 will be a year of normalisation."

Attacks on ships in the waterway have increased in recent weeks. Iran-backed Houthi militants have also carried out deadly attacks on Saudi Arabia, disrupting oil shipments. The kingdom called off its flagship Future Investment Initiative investor conference, planned for later this month, about a week before it was due to open.

The U.S. has ordered nonessential diplomats and family members to leave its missions in Saudi Arabia. Oil rose in Asian trading Thursday after that news.

The U.S.-Iran conflict is in a stalemate, not a settlement. Iran has issued public threats against Washington and signaled it is preparing for another round. CNN described those threats as an apparent bid to deter President Donald Trump from reigniting the fighting.

Trump said Wednesday that a nuclear-armed Iran could plunge America into chaos. Fox News carried his claim that the U.S. has "decimated" Iran.

Israeli Prime Minister Benjamin Netanyahu told the Jerusalem Post on Wednesday that military intelligence and the Mossad have warned Iran and its proxies are considering ways to influence Israel's elections. He threatened a response "with force and might they can't even imagine" if they do.

Iran's deputy foreign minister Kazem Gharibabadi met China's ambassador to Iran, Cong Peiwu, on Wednesday. He said the two countries are committed to deepening cooperation and countering "unilateralism."

What to watch

If Brent holds above $111, CNN reports it could settle at its highest level since May.

Citi's July call assumed Hormuz traffic would normalize. Its latest analysis says freight and ship-to-ship costs have not, even with exports recovering. Until the bank publishes a new target, it is unclear whether the $35-a-barrel freight burden eases, or whether another round of fighting makes it worse.