FGE NexantECA Disputes $60 Brent Bear Case as Hormuz Recovery Stalls and Iran Signals Transit Fees

Energy consultancy FGE NexantECA argues that fears of a global oil supply glut are overblown, pushing back against Citigroup's forecast that Brent crude will reach $60 per barrel by year-end. Chairman emeritus Fereidun Fesharaki said the Iran-U.S. conflict is "not the end of the story," but "the beginning." His view challenges a growing Wall Street consensus that the Strait of Hormuz reopening will flood markets with supply and send crude prices sharply lower.

Brent crude was trading at $71.76 per barrel as of late morning on July 6, 2026, per ICE, down 23.86% over the prior month. WTI was at $68.26 per barrel on the CME, down 25.2% over the same span, per TradingEconomics. Western Canadian Select, the heavy crude benchmark for Alberta oil sands, was at $56.34 per barrel, a discount of $11.92 to WTI, per OilPrice.com data as of late morning July 6. Both benchmarks hover near their lowest levels since late February, before the Gulf conflict disruptions drove an earlier price spike.

The Bear Case: Citi and Morgan Stanley Expect Oversupply

Citigroup projects Brent could sink to $60 per barrel before year-end, contingent on the U.S.-Iran Memorandum of Understanding hardening into a formal deal. The bank believes incentives to de-escalate outweigh the alternative for both governments. Morgan Stanley has also cut its 18-month oil price forecast, citing its expectation of sustained oversupply as Iranian and Gulf production returns.

Oil Authority previously tracked Morgan Stanley's Brent forecast at $75 in coverage of the divergence between the bank's higher figure and Citigroup's $60 target. The bank's subsequent forecast cut narrows that gap significantly. Both institutions now broadly align on a bearish supply outlook for 2026 and into 2027.

The June supply data supports the bear case at first glance. OPEC's 11 members produced 19.43 million barrels per day in June, a 3.3 million bpd jump from May's record low since at least the year 2000, per a Reuters monthly survey. Iran restored output after the United States lifted a naval blockade of its ports under a 60-day agreement. Kuwait, Saudi Arabia, Iraq, Nigeria, and Libya all contributed to the monthly rebound.

U.S. crude production reached nearly 14 million barrels per day in June, per the EIA, setting a new record. The UAE, now outside the OPEC grouping, added export volumes drawn from conflict-era storage builds. Combined, these supply additions have driven both crude benchmarks to multi-month lows.

FGE's Counter: Hormuz Remains Unstable

Fesharaki's caution rests on physical tanker movements, not diplomatic framing. On Sunday, only six tankers and LNG carriers exited the Persian Gulf via an alternate route near Oman's coast, per vessel-tracking data cited by OilPrice.com. On the preceding Friday and Saturday, at least eight tankers made unexplained U-turns near the Omani coastline. Four of those vessels eventually moved north and exited the Gulf near the Iranian coast, suggesting persistent route uncertainty.

Iran's ambassador added a new cost variable to the recovery equation. The ambassador stated that Iran "will definitely charge service fees" for passage through the strait, framing the levies as security and environmental measures rather than transit tolls. The Strait of Hormuz carries roughly 17 to 18 million barrels of crude per day under normal conditions, per EIA estimates. Any per-barrel fee applied at that scale would represent a material cost for tankers serving Asian buyers.

The Scale of the Informal Recovery vs. the Official Decision

OPEC formally approved an output quota increase of 188,000 barrels per day for August in its most recent ministerial decision. But June's actual OPEC supply recovery from May's trough already reached 3.3 million barrels per day. That informal, Hormuz-driven recovery is 17.6 times the size of the formal August quota increase. The market-moving supply event has been the Hormuz reopening, not the formal quota mechanism.

FGE NexantECA had previously forecast oil trading in the "upper $50s to low $60s" per barrel in 2027, contingent on lasting U.S.-Iran peace. Fesharaki called that peace scenario "impossible to imagine." China, Iran's largest crude customer, has delayed major purchase commitments while the diplomatic environment remains uncertain, limiting how quickly Iranian barrels clear the global market. That demand hesitation provides a brake on how fast bearish price forecasts can materialize, even if the physical supply is present.

At $71.76 Brent on the morning of July 6, the market sits 19.6% above Citigroup's $60 floor. Brent has already declined 23.86% in one month. Whether the next leg down closes the remaining distance to $60 depends on whether Fesharaki's conflict risk or Citigroup's de-escalation scenario proves accurate by year-end.