UBS has revised higher its Brent crude price forecasts, telling clients it now anticipates prices to be near $110 a barrel at the end of the year. In a note circulated to investors, strategist Giovanni Staunovo raised the bank's year-end Brent target to $110 from $100, citing ongoing volatility in Middle East supply, a decline in visible inventories, and historically elevated freight rates.
Alongside the year-end adjustment, UBS increased a sequence of 2027 monthly forecasts: March 2027 to $95 from $90, June 2027 to $90 from $85, and September 2027 to $85 from $80. The bank also altered its relative pricing assumptions between U.S. and international crude, widening the WTI discount to Brent to $10 for December while maintaining a $4 discount for 2027 as a whole.
"Hence, we retain a moderately constructive near-term outlook for crude oil," Staunovo wrote in the note.
UBS pointed to developments in Middle Eastern flows and shipping dynamics as central to its reassessment. Crude flows from the region have largely recovered to close to 18.8 million barrels per day in early October, compared with 19.9 million barrels per day before the onset of the conflict. However, the bank highlights that increased flows have not translated into a normalized market.
"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.
UBS noted that at least 30 attacks on ships in and around the Strait of Hormuz were reported in October, the highest monthly number on record. Those security incidents, together with new shipping practices such as additional ship-to-ship transfers, are constraining effective tanker availability despite the recovery in physical flows.
The bank also drew attention to the behavior of inventories. Global visible oil inventories have fallen by slightly more than 500 million barrels since February, a decline UBS attributes mostly to strategic reserve releases. With those releases now largely complete, UBS expects commercial stocks to show a steeper decline going forward.
Freight dynamics are a further element of UBS's outlook. Tanker freight rates from the Middle East to China have surged to levels in the range of $30 to $40 per barrel, compared with typical levels of $1 to $3 per barrel over the previous decade. At the same time, Chinese crude imports are recovering and could potentially reach 10 million barrels per day in October, according to UBS's note.
UBS closed its note by underscoring the elevated uncertainty surrounding its projections, tying that uncertainty to two primary factors: the unpredictable course of the Middle East conflict and the pace at which Gulf production and global oil demand recover. "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," the bank concluded.
This update from UBS adjusts both near-term and medium-term price paths while emphasizing logistical and security constraints in shipping that continue to influence market functioning despite a rebound in physical flows from the Gulf.