UBS cuts medium term Brent oil forecasts

UBS has reduced its medium term expectations for Brent crude (UKOIL), cutting its 2027 price forecast to $75 per barrel. The bank also now projects that Brent will average $80 per barrel during the second half of 2026. These figures represent a reset of its view on how the oil market is likely to evolve over the next few years.

The new forecasts focus on the period from late 2026 into 2027, which is seen as important for longer term planning by energy producers, consumers, and investors. By clarifying its expectations for these years, UBS provides a reference point for assessing potential revenue, cost, and budget scenarios tied to oil prices.

A key driver behind the forecast changes is increased shipping of oil through the Strait of Hormuz. This waterway is a critical transit point for global crude supplies, and changes in its accessibility can influence perceptions of supply risk and price outlooks. UBS cites the improvement in these flows as a reason to reassess the level of risk priced into its oil projections.

With more oil moving through the strait, concerns about sustained disruption have eased compared with earlier periods of tension. The higher volumes reaching global markets reduce the likelihood of severe shortages within the forecast horizon, supporting lower projected price levels than previously assumed.

UBS also links its lower forecasts to a memorandum of understanding between the United States and Iran. This understanding has contributed to easing short term supply risks, complementing the recovery in shipping through the Strait of Hormuz. Together, these developments have helped to stabilize expectations around future export flows from the region.

By reducing the immediate risk of sharp supply interruptions, the memorandum has diminished the need for a large geopolitical risk premium in medium term oil price assumptions. This backdrop has allowed UBS to set a lower trajectory for Brent in the second half of 2026 and in 2027 than it had previously projected.

The updated UBS forecasts point to a view of the oil market where supply conditions are more secure than they appeared during recent periods of strain. An average Brent price of $80 per barrel in the second half of 2026, followed by a 2027 level of $75, suggests expectations of ample availability relative to anticipated demand.

These projections may influence how market participants assess future investment needs, hedging strategies, and budget planning in energy reliant sectors. While actual prices will depend on many factors, the revisions underscore the importance of shipping conditions and geopolitical arrangements in shaping medium term oil price outlooks.