UBS now sees Brent at $110 by year-end, raises 2027 price forecasts citing freight and supply risks

UBS believes the oil market's tightness has shifted from production to logistics. Even with Gulf flows close to pre-conflict levels, shipping attacks and scarce tankers keep delivered crude expensive, meaning a supply recovery alone may not substantially lower prices. With strategic reserve releases nearly completed and Chinese buying returning, the market has lost two of its main buffers, leaving it more exposed to any fresh disruption around Hormuz. Higher-for-longer oil also keeps inflation pressure alive ahead of the Fed decision, bolstering the case for further tightening and weighing on rate-sensitive assets. Freight-sensitive refiners and importers in Asia are most exposed to the shift from barrel scarcity to shipping scarcity.

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Gulf crude is still moving, but UBS says record attacks on vessels, drained stocks and reviving Chinese demand are making barrels costlier to transport, keeping Brent elevated well into 2027.

Key points:

• UBS forecasts Brent crude to stay near $110 by year-end and upgraded its 2027 projections: March to $95 from $90, June to $90 from $85 and September to $85 from $80.
• Global oil inventories have dropped sharply and promised strategic reserve releases are largely finished, which UBS says should support prices.
• Combined flows through the Strait of Hormuz and bypass pipelines rebounded to nearly 18.8 million bpd in early October, compared with 19.9 million before the conflict.
• At least 30 attacks on ships near the Strait were reported in October, a monthly record, driving up freight rates and tightening tanker capacity.
• China's crude imports have recovered from earlier lows, removing a key shock absorber for the market.
• Brent crude eased about 0.5% to around $115 on Tuesday and US crude fell to around $101, ahead of the Fed decision.

According to UBS, Brent crude is expected to remain near $110 a barrel by year-end, and the bank has raised its 2027 price forecasts, arguing that depleted inventories, record freight costs and recovering Chinese demand will keep oil elevated even as Middle Eastern supply recovers from this year's disruptions.

The bank raised its March 2027 Brent forecast to $95 from $90, its June 2027 forecast to $90 from $85 and its September 2027 forecast to $85 from $80. The upgrades came as oil fell for a second consecutive session on Tuesday, with Brent declining about 0.5% to around $115 and US crude slipping about 0.4% to around $101, as investors awaited major corporate earnings and the Federal Reserve's rate decision. Brent is still up roughly 91% this year and US crude around 78%.

UBS said global inventories have fallen sharply and that pledged releases from strategic oil reserves are now largely completed, removing a buffer that had helped soften supply losses. An undersupplied market could drain commercial stocks further, which the bank said should keep prices supported.

Middle Eastern loadings have recovered substantially from the severe disruption earlier in the year. Citing data from Petro-Logistics, UBS estimated combined crude flows through the Strait of Hormuz and bypass pipelines at more than 17.3 million barrels per day in September and close to 18.8 million in the first three weeks of October, compared with an average of 19.9 million in January and February before the conflict.

That recovery, however, has coincided with a sharp deterioration in maritime security. At least 30 attacks on ships in and around the Strait were reported in October, the highest monthly total on record, pushing freight rates higher and limiting tanker availability. UBS said this means the oil balance now depends not only on how many barrels are produced, but on whether there is enough affordable shipping capacity to move them where they are needed. Freight sets the delivered cost of crude, and tight shipping can reshape regional trade flows and refinery economics.

Chinese buying is the final factor UBS highlighted. Imports have recovered materially from exceptional lows earlier this year, removing what had been an important shock absorber for the global market.

UBS analyst Giovanni Staunovo said uncertainty around the bank's forecasts remains high, reflecting the unpredictable nature of the Middle East conflict and the pace of recovery in both Gulf production and global oil demand.