Story
UBS Hikes Oil Price Forecasts on Tightening Supply and Geopolitical Risks
Summary
The Swiss bank raised its year-end Brent crude forecast to $95 a barrel, citing shrinking inventories and persistent supply risks from the Middle East and other key producers.
UBS has significantly raised its oil price forecasts for the next three quarters, citing an increasingly tight market, shrinking inventories, and persistent geopolitical risks to supply. In a note to clients, the bank said it now sees the global benchmark Brent crude ending the year at $95 a barrel, a notable increase from its previous forecast of $85.
Revised Forecasts
According to UBS strategist Giovanni Staunovo, the bank has adjusted its price targets across the forecast horizon. The updated projections include:
- Year-end 2026: Brent crude forecast raised to $95 per barrel from $85.
- March 2027: Brent forecast lifted to $90 per barrel from $80.
- Mid-2027: Brent expected to trade at $85 per barrel.
- September 2027: Forecast remains unchanged at $80 per barrel.
UBS continues to assume a $4 discount for West Texas Intermediate (WTI) crude relative to Brent.
Supply Squeeze Drives Upgrade
AdThe upward revision is underpinned by evidence of a rapidly tightening market. Staunovo highlighted that oil-on-water inventories have fallen by 150 million barrels over the past two months. This decline is attributed to lower crude exports in August from the Middle East, Russia, Mexico, the North Sea, and Brazil.
Persistent supply risks also contribute to the bullish outlook. The strategist pointed to recent strikes on Saudi Arabian energy facilities and threats from Iranian officials as factors skewing price risks to the upside in the near term.
Market Context and Outlook
The forecast adjustment comes as Brent crude has already climbed above $100 a barrel, surpassing UBS's new year-end target. Despite the high spot price, the bank's forecasts remain above current market pricing for future delivery due to a downward-sloping futures curve.
"We therefore retain a moderately constructive outlook for crude oil," Staunovo wrote. However, he cautioned that "uncertainty remains elevated" given the ongoing conflict in the Middle East and the uncertain pace of recovery in both production and demand from the Gulf region.
Read next
More on Commodities
US-China Summit to Tackle Key Commodity Disputes in Agriculture, Energy
The upcoming meeting between President Trump and President Xi is expected to focus on resolving trade frictions involving U.S. agricultural exports, Chinese energy tariffs, and the supply of critical rare earth materials.
Citi Warns Hawkish Fed Policy Threatens Non-AI Economic Growth
A recent report from Citi Research warns that the Federal Reserve's hawkish monetary policy could suppress the U.S. housing market and make the broader economy dangerously dependent on AI investment.
Petrobras Board Approves Participation in New Government Diesel Subsidy Program
Brazil's state-run oil company, Petrobras, will join a new government program providing a 1.00 real per liter subsidy on diesel, a move aimed at stabilizing fuel prices ahead of the upcoming presidential election.
Oil Prices Retreat as China Urges Iran to Curb Houthi Attacks on Saudi Facilities
Crude oil futures fell on Friday after reports that China, at Saudi Arabia's request, pressured Iran to rein in Houthi attacks, easing some geopolitical supply fears. However, ongoing pipeline disruptions and refining constraints continue to support the market.