Citi bumps 3Q26 Brent forecast to $86, holds 2027 view at $65

Market impact:

According to Citi, the bump to its 3Q26 Brent projection tracks recent strength in prices, yet the unchanged and lower numbers for 4Q26 and 2027 point to a market that is expected to loosen significantly once the Strait of Hormuz is fully open again. The bank sees a surplus even bigger than the one before the conflict taking shape as flows return to normal, which it reads as a bearish indicator for crude's medium-term outlook. On the gas side, Citi's cut to Henry Hub stems from its view that ongoing US output growth will keep domestic prices in check, while the higher TTF figures reflect an expectation of tighter European gas fundamentals compared with earlier assumptions. Overall, the adjustments point to oil and gas moving in different directions in the quarters ahead, with crude at risk of sliding further by 2027 and European gas exposed to modest gains.

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Citi is more optimistic on near-term Brent but maintains a bearish line through 2027, betting that a reopened Hormuz will alter the surplus picture.

Summary:

• Citi raised its 3Q26 Brent crude estimate to $86 per barrel, describing the move as a mark-to-market adjustment (research note, 3 Sep, 4:02pm).
• The 4Q26 Brent projection holds at $70 per barrel, while the 2027 figure remains $65 per barrel.
• A reopening of the Strait of Hormuz is expected by Citi to create an even larger oil surplus than the one seen before the conflict.
• For US natural gas, Citi reduced its 3Q26 Henry Hub forecast to $2.9 per MMBtu, pointing to anticipated production growth.
• European gas TTF forecasts were raised to €60/MWh for 3Q26 and €56/MWh for 4Q26.

In a research note dated 3 September, Citi increased its Brent forecast for the third quarter of 2026 to $86 per barrel. The bank characterised that as a mark-to-market adjustment tied to recent trading, not a change in its longer-term stance. Forecasts for the period after that were left untouched, with 4Q26 Brent still seen at $70 per barrel and 2027 at $65 per barrel.

Citi's reasoning focuses on the Strait of Hormuz. Once the waterway is open, the bank said, oil markets ought to see an even bigger surplus than the one that preceded the disruption to shipments through the strait. This is a projection rather than a certainty; in Citi's view, the present firmness in prices will prove fleeting, with expected normalisation in supply gradually overriding any remaining risk premium and dragging values down through next year and into 2027.

Natural gas also featured in the same note. Citi cut its 3Q26 US Henry Hub estimate to $2.90 per million British thermal units, saying it expects output to keep climbing and keep domestic inventories well supplied, which should hold prices down. That reduction contrasts with the bank's more positive view of European gas, as it increased TTF forecasts to €60 per MWh for 3Q26 and €56 per MWh for 4Q26.

Overall, the changes highlight a gap between Citi's near-term and longer-term oil price forecasts, and between its US and European gas calls. For oil, the implication is that today's firm market may not last if Hormuz reopens as the bank anticipates. On gas, the mixed picture indicates Citi expects US supply to grow faster than demand even as Europe turns slightly tighter than previously thought. The main variables to monitor would be any confirmation of when the Strait of Hormuz might reopen and the US gas production data, which could either support or undercut the bank's updated projections.