Brent crude oil prices extended their decline this week, falling to $73.25 per barrel—a drop of nearly 39% from the year's highs—as major Wall Street banks revised their outlooks downward. The sell-off comes amid rising supply expectations following the reopening of the Strait of Hormuz and persistent demand concerns.
Major Banks Cut Price Targets
Goldman Sachs now expects Brent to average around $80 per barrel in the fourth quarter, down from a prior estimate of $90. The bank also lowered its West Texas Intermediate (WTI) forecast to $75, flagging the potential for an oil surplus. Morgan Stanley projects Brent averaging $90, while Citigroup slashed its estimate to $70. JPMorgan forecasts Brent at $86 in the third quarter and $80 in the fourth quarter.
The revisions follow the recent U.S.-Iran agreement that reopened the Strait of Hormuz, a critical chokepoint for global oil shipments. Traffic through the strait has increased, with millions of barrels of oil now seeking passage, adding to global supply. This comes on top of additional output from Saudi Arabia's pipeline and increased exports from the U.S. and Canada during the earlier conflict.
Geopolitical Factors and Demand Concerns
Analysts believe that despite prior threats, the Trump administration is unlikely to restart hostilities with Iran ahead of midterm elections, given the president's low approval ratings. Iran retains significant escalation options, including targeting Red Sea shipping and Middle East energy infrastructure, but a renewed conflict appears improbable in the near term.
On the demand side, the International Energy Agency (IEA) has warned of significant demand destruction due to elevated prices and supply disruptions. The combination of rising supply and weakening demand has pressured prices lower.
Related reading: Brent Crude on Track for 6% Weekly Gain as Hormuz Disruptions Keep Supply Risk Elevated and Oil Spikes on US-Iran Strikes, But Analyst Forecasts Signal Caution Ahead.
Technical Outlook
From a technical perspective, Brent crude has broken below the 61.8% Fibonacci retracement level and is approaching the 78.2% retracement. The price has fallen beneath both the 50-day and 200-day exponential moving averages (EMAs), while the Relative Strength Index (RSI) has entered oversold territory at 28. These signals suggest the downward trend is gaining momentum, raising the risk of a further decline toward the $70 support level.
This article is for informational purposes only and does not constitute financial advice.
