Piper Sandler Lifts Brent Forecast to $90, Warns It May Be an Underestimate

Piper Sandler has increased its second-half Brent crude forecast to $90 per barrel, citing a tighter-than-expected global supply balance, and noted in its report that the new target may still prove to be an underestimate.

Brent Forecast Raised on Supply Squeeze

The investment bank lifted its price forecast for the international oil benchmark by $10 per barrel for the second half of the year. The firm attributed the revision to two primary factors: an "entrenched Middle East supply stalemate" and significant cuts to Russian refining capacity, which have constrained global supply more than the firm anticipated in July.

Piper Sandler described the upgrade as "mostly a mark-to-market exercise." It noted that Brent prices had already averaged $88 per barrel through the third quarter, well above the firm's previous mid-point forecast of $80/bbl. This sustained price strength has direct implications for energy sector equities, as it typically boosts cash flow and shareholder return capacity for exploration and production (E&P) companies and integrated oil majors.

Upside Risks Flagged

In a notable admission, the firm stated, "We fear that $90/b for Q4 may prove an under-estimate," flagging potential upside risk to its own freshly raised forecast. This suggests that the narrow gap between the Q3 average and the new Q4 target could easily be surpassed.

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According to the report, any further supply disruptions, such as escalating tensions in the Strait of Hormuz or additional Ukrainian attacks on Russian energy infrastructure, could push the benchmark price through its new target.

Contrasting View on Natural Gas

While bullish on oil, Piper Sandler holds a more subdued and explicitly below-consensus view on U.S. natural gas. The firm reiterated its lower forecasts, pointing to a market in "easy equilibrium" due to steady production gains of 4-5% annually.

The report highlighted that natural gas inventories maintained a surplus of 150 billion cubic feet relative to five-year averages, while prices averaged below $3/MMBtu in the second and third quarters. Piper Sandler argued that U.S. producers can comfortably meet rising demand from LNG exports and data centers at prices around $3/MMBtu, limiting the potential for a significant price spike.