UBS lifts Brent forecasts as Middle East supply risks and tight logistics keep oil prices elevated

Market Analysis

UBS has raised its Brent crude price forecasts, citing persistent supply risks in the Middle East, falling visible inventories and sharply higher tanker freight rates. In a new research note, strategist Giovanni Staunovo said the bank now expects Brent to remain near $110 a barrel at year-end, up from a prior $100 target.

Alongside the year-end update, UBS nudged out its 2027 quarterly projections: March 2027 is now seen at $95 a barrel (previously $90), June 2027 at $90 (from $85) and September 2027 at $85 (from $80). The bank also widened its WTI discount to Brent to $10 for December while maintaining a narrower $4 discount for full-year 2027.

Hence, we retain a moderately constructive near-term outlook for crude oil, Staunovo wrote, underlining that elevated uncertainty remains the dominant theme for markets.

Drivers: Middle East risk, inventories and freight

UBS points to several factors underpinning its more bullish stance. Middle Eastern crude flows have largely recovered from the initial shock of the conflict, approaching about 18.8 million barrels per day in early October versus roughly 19.9 million bpd before the disruption. Still, security risks persist: at least 30 attacks on ships in and around the Strait of Hormuz were reported in October, the highest monthly tally on record.

Those risks have not been limited to supply disruptions alone. Vessels remain exposed to attacks, insurance and freight costs have surged, and extra ship-to-ship transfers needed to circumvent risk-prone areas are tying up tanker capacity, UBS noted. Tanker freight from the Middle East to China has climbed to roughly $30$40 per barrel, compared with typical decade-average levels of $1$3 per barrel.

At the same time, global visible oil inventories have fallen by just over 500 million barrels since February, mainly reflecting strategic reserve releases. With official release programmes largely complete, UBS expects commercial stocks to come under renewed downward pressure, tightening the market further.

Chinas crude imports are also recovering and could reach near 10 million barrels per day in October, a demand-side development that adds to the supply-demand balance tightening.

Outlook and risks

UBS summarized its view by stressing elevated forecast uncertainty. The bank highlighted two main unknowns: the unpredictable trajectory of the Middle East conflict and the pace at which Gulf production and global demand recover. Both factors could swing prices materially in either direction.

For now, the combination of ongoing geopolitical risk, falling inventories and record freight and insurance costs has been sufficient for UBS to lift medium-term Brent targets and to expect a continued constructive near-term oil market.

Investors and market participants should watch developments in Gulf output, ship attack incidents, freight and insurance rates, and the evolution of commercial stock levels as the strategic-release programmes wind down.

UBSs revised projections and the market signals behind them underscore how logistics and geopolitical risk can amplify price moves even as physical flows approach pre-conflict volumes.