Key facts
- Brent crude futures traded at $111.70 on Thursday, up $2.88.
- Freight rates from the Gulf to China approached $35 per barrel, over 20 times the prior decade's average.
- Gulf crude exports recovered to over 81% of prewar levels in September, excluding Iran.
- Citi previously forecast Brent at $60-$65 by year-end.
Brent crude futures surged past $112 a barrel on Thursday, driven by persistent supply concerns and significantly elevated shipping costs from the Persian Gulf. Citigroup, which had previously forecast Brent at $60-$65 by year-end, revised its assessment due to logistical challenges despite recovering export volumes.
More than 1 million barrels per day of crude was transferred between vessels in September, a practice virtually nonexistent before the U.S.-Iran conflict. Citi estimates freight rates for very large crude carriers from the Gulf to China have approached $35 per barrel, more than 20 times the average of the previous decade.
While Gulf crude exports, excluding Iran, recovered to over 81% of prewar levels in September, the increased reliance on ship-to-ship transfers and soaring freight costs have made delivered supplies expensive. Citi offered no new price target in its latest assessment, warning that the recovery has been in volumes, not shipping efficiency.