In Catan, can you continue a "circular" road?
Yes.

Say you start with the following:

           _
     _ _ /   \
           _ /


We all agree that's 7 segments long. It makes no sense that adding a segment would make it shorter, so the following can't possibly be 6 segments long:

           _
     _ _ /   \
         \ _ /


Therefore, it must be 8, and your example must be 7.

The rules indicate that you count the number of roads in the longest branch. In your example, there are six on both the right and left branch, for a total length of seven.