UBS raises oil price forecasts for the next three quarters

Investing.com -- In a note to clients, UBS has raised its oil price forecasts for the next three quarters, citing a tightening market, persistent risks to supply flows and shrinking inventory buffers.

Strategist Giovanni Staunovo told investors that the bank now expects Brent crude to trade at $95 a barrel by year-end, up from $85 previously, and at $85 by the middle of 2027.

Its March 2027 forecast was raised to $90 a barrel from $80, while the September 2027 forecast was left unchanged at $80. UBS continues to assume a $4 discount for West Texas Intermediate relative to Brent.

Brent has climbed in recent weeks, topping $100 a barrel today, with inventory data still pointing to an under-supplied market.

Oil on water inventories have fallen by 150 million barrels over the past two months, Staunovo said, driven by lower global crude exports in August from the Middle East as well as Russia, Mexico, the North Sea and Brazil.

The strategist pointed to strikes on Saudi energy facilities and threats from Iranian officials as signs that risks remain tilted higher. "In the near term, we believe risks to prices remain skewed to the upside," he wrote.

Even with the spot price above its year-end target, UBS forecasts sit above market pricing because of the downward-sloping futures curve.

"We therefore retain a moderately constructive outlook for crude oil," Staunovo wrote, though he cautioned that uncertainty remains elevated given the Middle East conflict and the pace of recovery in Gulf production and demand.

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