BCA Research assesses that the recent slide in oil has largely eliminated the war premium that had been built into prices, but it warns that the outlook is still skewed toward higher levels. The research house expects Brent crude to trade in a $90 to $110 per barrel range.
On the drivers of the pullback, BCA said the month-to-date selloff "has priced out much of the war premium." The firm attributes the move not to weakening fundamentals but to a reduction in the risk premium. It points to changes in investor positioning, lower premiums for physical oil and the way futures markets are priced as evidence that participants are less fearful of a renewed disruption to supply.
At the same time, BCA cautioned that tensions remain and that a rapid settlement of the conflict should not be assumed. "Investors should not treat a rapid resolution to the conflict as a foregone conclusion," the firm wrote. Because the risk premium has already been compressed, BCA said a peace deal would likely only push prices modestly lower, while a renewed and significant escalation would send prices back to new highs for the conflict.
Inventory dynamics are central to BCA's assessment. The research house noted that stockpiles are depleted relative to past buffers, which means they would provide less protection in the event of another supply shock. Governments, BCA added, are more inclined to conserve strategic inventories rather than release them aggressively.
Even if a durable ceasefire were concluded, BCA argues there are factors that would sustain oil prices. The firm expects Gulf producers to maximize output and exports while conditions permit, but it sees recovering demand - explicitly including Chinese imports - and efforts to rebuild inventories absorbing those incremental barrels. "This creates a floor for Brent, even in the event of a durable ceasefire," BCA said.
In sum, BCA's view is that the removal of a large portion of the war premium has reduced immediate downside, but limited inventories and the potential for demand recovery leave upside risks that market participants should monitor closely.
Key points
- BCA expects Brent to trade in a $90 to $110 per barrel range.
- The recent selloff largely removed the war premium, driven by investor positioning and futures and physical market pricing.
- Even with a durable ceasefire, recovering demand and inventory rebuilding alongside Gulf output could support prices.
Impacted sectors
- Oil and broader energy markets (producers, refiners, traders)
- Governments managing strategic stockpiles and related fiscal planning
- Markets sensitive to commodity price moves, including transport and industrial sectors
Risks and uncertainties
- Geopolitical risk: a renewed escalation would lift prices toward fresh conflict highs, affecting energy and shipping markets.
- Inventory constraints: depleted stockpiles mean less buffer for supply shocks, creating vulnerability for supply-reliant sectors.
- Policy response: governments opting to conserve rather than release stockpiles could limit immediate downward pressure on prices, impacting downstream users.