UBS is arguing that the oil market’s tightness has moved from production to logistics. Even with Gulf flows close to pre-conflict levels, shipping attacks and scarce tankers keep delivered crude expensive, which means a supply recovery alone may not bring prices down much. With strategic reserve releases largely done and Chinese buying back, the market has lost two of its main shock absorbers, leaving it more exposed to any new disruption around Hormuz. Higher-for-longer oil also keeps inflation pressure in play ahead of the Fed decision, adding to the case for further tightening and weighing on rate-sensitive assets. Freight-sensitive refiners and importers in Asia are the most exposed to the shift from barrel scarcity to shipping scarcity.
—
Earlier:
Oil: Private survey of inventory shows a headline crude oil draw vs build expected
—
Gulf oil is flowing again, but UBS says record attacks on shipping, drained inventories and returning Chinese demand mean the barrels are getting more expensive to move, keeping Brent elevated well into 2027.
Summary:
UBS expects Brent to hold near $110 by year-end and raised its 2027 forecasts: March to $95 from $90, June to $90 from $85 and September to $85 from $80.
Global inventories have fallen sharply and pledged strategic reserve releases are largely complete, which UBS says should support prices.
Combined Hormuz and bypass pipeline flows recovered to close to 18.8 million bpd in early October, against 19.9 million before the conflict.
At least 30 attacks on ships near the Strait were reported in October, a monthly record, pushing freight rates higher and squeezing tanker capacity.
Chinese crude imports have recovered from earlier lows, removing a key shock absorber for the market.
Brent eased around 0.5% to around $115 on Tuesday and US crude fell to around $101, ahead of the Fed decision.
UBS expects Brent crude to hold near $110 a barrel by year-end and 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 disruption.
The bank lifted 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 straight session on Tuesday, with Brent easing around 0.5% to around $115 and US crude slipping around 0.4% to around $101, as investors awaited major corporate earnings and the Federal Reserve’s rate decision. Brent is still up around 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 complete, removing a buffer that had helped cushion 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 said combined crude flows through the Strait of Hormuz and bypass pipelines were estimated 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 come alongside 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 course of the Middle East conflict and the pace of recovery in both Gulf production and global oil demand.
This article was written by Eamonn Sheridan at investinglive.com.
