Oil prices have retreated sharply from recent highs despite continued disruption in the Strait of Hormuz, as high inventories, weaker demand growth, and expectations of an eventual U.S.-Iran resolution have cushioned the market impact, according to Citigroup analysts.

Brent crude surged to as high as $125-$126 a barrel in recent days before falling back toward $100-$114 levels, depending on the contract month, after traders reassessed the duration of supply risks and signs of softer demand.

Citi said a roughly $14 sell-off over the past week reflected several stabilising factors, including strategic petroleum reserve releases, high global inventories, and weaker oil consumption in developing economies.

The bank also pointed to China’s sharp reduction in crude imports, estimated at around 2.4 million barrels per day in April and May from a 2025 average of 11.6 million bpd, which it said had eased pressure on global supplies.

According to Citi, China has managed the decline partly through lower stockpiling and reduced refined product exports.

Citi maintained its near-term bullish stance, keeping its 0-3 month Brent point forecast at $120 a barrel and estimating average Brent prices of $110 in the second quarter, easing to $95 in the third quarter and $80 in the fourth.

The bank said markets may still be underpricing the risk of a prolonged Strait disruption if U.S.-Iran negotiations remain difficult.
Source: Investing.com