Story
UBS Raises Oil Price Forecasts on Tighter Supply and Geopolitical Risks
Summary
Citing a tightening market, shrinking inventories, and persistent supply risks, UBS has increased its oil price forecasts for the next three quarters, now seeing Brent crude at $95 per barrel by year-end.
UBS has raised its oil price forecasts for the next three quarters, pointing to a tightening market, persistent supply disruption risks, and shrinking inventory buffers. The investment bank now expects the global benchmark Brent crude to trade at $95 per barrel by the end of the year, a significant increase from its previous forecast of $85.
Revised Forecasts
In a note to clients, UBS strategist Giovanni Staunovo outlined the bank's updated price targets. While the year-end forecast saw the largest revision, the bank also adjusted its expectations for early 2027.
- March 2027: Forecast raised to $90 per barrel from a previous $80.
- Mid-2027: The price is expected to pull back to $85 per barrel.
- September 2027: The forecast remains unchanged at $80 per barrel.
UBS said it continues to assume a $4 per barrel discount for West Texas Intermediate (WTI) crude relative to Brent.
Tighter Market Fundamentals
AdThe upward revision is underpinned by clear signs of an undersupplied market. Brent crude prices have climbed steadily in recent weeks, recently surpassing the $100 per barrel mark. According to Staunovo, this reflects a significant drawdown in inventories.
Floating crude storage has reportedly fallen by 150 million barrels over the past two months. This decline is attributed to a reduction in global crude exports during August from key producers including the Middle East, Russia, Mexico, the North Sea, and Brazil.
Geopolitical Risks and Outlook
Geopolitical tensions are adding upward pressure on prices. The bank highlighted ongoing risks, including attacks on Saudi energy infrastructure and threats from Iranian officials, as factors that could further disrupt supply.
"In the short term, we believe the risks to oil prices remain skewed to the upside," Staunovo wrote. Despite spot prices already trading above the bank's new year-end target, UBS maintains a "mildly positive" outlook, noting that its forecasts remain above levels implied by the futures market. However, Staunovo cautioned that uncertainty remains high due to the conflict in the Middle East and the pace of production and demand recovery in the Gulf region.
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