Jefferies has revised upward its long-term oil price outlook, saying the forward curve no longer captures the structural pressures reshaping global energy markets as supply tightness intensifies and geopolitical threats to energy infrastructure grow.
The firm increased its terminal price assumptions by $5 per barrel for both major benchmarks, setting terminal WTI at $70 per barrel and terminal Brent at $75 per barrel. It also raised its 2026 WTI projection to $81.79 per barrel and its 2027 WTI forecast to $75 per barrel.
Analysts at Jefferies said the current futures curve is mispriced at both the front and back ends. At the near end, they estimate roughly 10–12 million barrels per day of oil, condensate, and refined products are effectively offline amid what they describe as an escalating energy crisis.
According to the team led by Lloyd Byrne, the accumulation of floating storage due to sanctions, together with strategic reserve releases totaling about 400 million barrels, has temporarily suppressed front-month contract prices and masked the severity of supply tightness. They warned that as those buffers are drawn down, front-month prices should rise to levels that incentivize demand destruction.
On the long end of the curve, Jefferies argued that prices are too low to trigger the supply response necessary to rebalance markets. U.S. shale, once a rapid swing producer, has adopted a more disciplined, returns-focused stance. The analysts said management teams across the sector show little appetite to accelerate activity even if WTI trades in the high-$60s to low-$70s in 2027, noting that the duration of price strength is a key determinant of capital allocation decisions.
In Jefferies models, U.S. shale oil growth is flat in 2026 under normalized pricing, and the firm sees only around 550,000 barrels per day of additional exit-rate growth at an $85 WTI price point. The analysts warned that this level of incremental supply could be insufficient to meet demand and allow inventories to rebuild.
Beyond conventional supply dynamics, the firm pointed to a structural change in the risk profile for energy infrastructure. The proliferation of inexpensive drone technology, combined with ballistic missiles capable of evading defenses, has, in their view, fundamentally altered the risk calculus for global energy assets.
Jefferies noted that approximately 20% of identified global liquified natural gas growth sits behind the Strait of Hormuz, and concluded that investor weightings toward real assets will need to increase to reflect heightened geopolitical and physical risk.
On portfolio construction, the analysts recommend adding high-quality energy operators on pullbacks, arguing investors are likely to sell into weakness. Their view is that front-of-the-curve prices may come down as temporary buffers are drawn, while the back of the curve should move higher as structural constraints persist.
Jefferies top picks include Ovintiv, ConocoPhillips, EOG Resources, Northern Oil and Gas, Cenovus Energy, SLB, Baker Hughes, and Halliburton.
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Summary
Jefferies has raised its long-term WTI and Brent price forecasts and warns that the futures curve understates both near-term and long-term supply risks. Temporary buffers such as floating storage and strategic reserve releases have muted front-month prices, while disciplined U.S. shale and insufficient longer-term pricing may fail to deliver the supply response needed to rebalance markets. The firm also points to evolving security risks around energy infrastructure and recommends buying high-quality operators on weakness.
Key points
- Terminal price adjustments: Jefferies raised terminal WTI to $70 and terminal Brent to $75, with 2026 WTI at $81.79 and 2027 WTI at $75.
- Front-end distortion: Roughly 10 612 million barrels per day are effectively offline; about 400 million barrels of strategic reserve releases and floating storage accumulation have masked near-term tightness.
- Supply response concerns: Disciplined U.S. shale and limited incremental growth (only ~550,000 bpd at $85 WTI) may be insufficient to rebuild inventories, shaping sector opportunities in exploration, production, and oilfield services.
Risks and uncertainties
- Duration of buffer effects: The temporary nature of floating storage and strategic reserve releases could lead to sudden front-month price spikes as these buffers erode, affecting transportation and refining sectors.
- Insufficient supply response: If U.S. shale and other producers do not materially increase activity, tightness could persist, impacting oil producers, refiners, and broader commodity-sensitive industries.
- Escalating infrastructure threats: The rise of low-cost drone and missile capabilities introduces heightened geopolitical risk to production and shipping routes, with implications for LNG projects and real asset valuations.