UBS's new Brent price forecasts as Middle East supply risk supports oil prices

Investing.com -- UBS raised its Brent crude forecasts and now expects prices to stay near $110 a barrel at year-end, citing volatile Middle East supply, falling inventories and record freight rates.

In a new note, strategist Giovanni Staunovo lifted the year-end Brent target to $110 from $100. The bank also raised its March 2027 forecast to $95 from $90, its June 2027 forecast to $90 from $85, and its September 2027 forecast to $85 from $80. UBS widened the WTI discount to Brent to $10 for December, while keeping a $4 discount for 2027.

“Hence, we retain a moderately constructive near-term outlook for crude oil,” Staunovo wrote.

Middle Eastern crude flows have recovered to close to 18.8 million barrels per day in early October, compared with 19.9 million before the conflict.

However, at least 30 attacks on ships in and around the Strait of Hormuz were reported in October, the highest monthly number on record.

“Higher oil flows have not translated into a normalization of the market: Vessels remain exposed to attacks, insurance and freight costs have risen sharply, and increased ship-to-ship transfers required to cross the Strait of Hormuz are absorbing tanker capacity,” the strategist said.

He added that global visible oil inventories have fallen by slightly more than 500 million barrels since February, mostly from strategic reserve releases. With those releases now largely complete, UBS expects commercial stocks to decline more sharply.

Tanker freight rates from the Middle East to China have reached $30 to $40 a barrel, compared with $1 to $3 over the previous decade. Chinese crude imports are also recovering, potentially reaching 10 million barrels per day in October.

UBS concluded: “Uncertainty around our forecasts remains elevated, reflecting both the unpredictable nature of the Middle East conflict, and the pace of recovery in Gulf production and global oil demand.”

Original Article

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