OCBC Raises Brent Oil Price Forecast to $80 Amid Supply Concerns

OCBC Bank has raised its forecast for Brent crude oil prices to $80 per barrel by the end of 2026, up from a previous estimate of $75, according to analysts Sim Moh Siong and Christopher Wong. This adjustment is primarily attributed to ongoing supply disruptions in the Middle East, particularly concerning the Strait of Hormuz, which remains a critical shipping route for global oil.

Recent geopolitical tensions between the US and Iran have intensified, leading to fluctuations in oil prices. The analysts noted that Brent crude has traded above $90 per barrel as these tensions escalated, with military strikes exchanged for the first time in about a month. This situation has raised concerns regarding the stability of oil supplies through the Strait of Hormuz, where negotiations to reopen the route have stalled for over five months.

In their report, OCBC highlighted that the market is currently facing tightening physical balances, with falling inventories and rising transport costs contributing to a more precarious supply situation. Notably, diesel has emerged as a key supply risk, with shortages becoming more pronounced. As a result, analysts suggest that the market is adapting to crude supply shocks by running down existing buffers.

“The market has adapted to crude supply shocks mainly by running down buffers.”OCBC Analysts Sim Moh Siong and Christopher Wong

According to the analysts, the market has adapted to crude supply shocks mainly by running down buffers. They emphasized that the focus should now be on the refined products space, particularly diesel, as refinery capacity remains tight and transport costs are soaring. This has led to a widening gasoil crack spread, which is the price difference between crude oil and refined diesel.

As the global oil demand is projected to reach a record 103 million barrels per day this year, OCBC noted that the market has thin buffers to absorb further supply shocks from the Middle East. With global crude inventories falling below their five-year averages, OCBC recommends that derivative traders consider long positions on ICE Gasoil futures to capitalize on the anticipated premium of near-term tightness.

Overall, the combination of geopolitical risks and supply chain disruptions is expected to keep upward pressure on Brent crude prices, with analysts suggesting that traders should prepare for sustained volatility in the energy markets.