UBS's new Brent price forecast supports oil prices due to Middle East supply risks

UBS has raised its Brent crude outlook, now betting the price will rise to around $110 a barrel by the end of the year. The boost comes as the Middle East has seen supplies crunch, global stockpiles have declined and freight costs have reached record highs.

Strategist Giovanni Staunovo outlined the changes in a recent note. He raised his year-end Brent target to $110 from $100. Estimates for March 2027 rose to $95 (up from $90), June 2027 to $90 (up from $85), and September 2027 to $85 (up from $80). UBS also increased the WTI‑to‑Brent discount for December to $10, while keeping the spread for 2027 at $4.

"We still see a moderately optimistic near-term outlook for crude oil," Stounovo wrote.

Middle Eastern crude oil shipments are back to about 18.8 million barrels per day in early October, down slightly from a pre-conflict peak of 19.9 million barrels.

At least 30 attacks on ships were recorded in and around the Strait of Hormuz in October – the highest monthly number on record.

"Higher oil flows have not stabilized the market. Ships are still at risk of strikes, insurance premiums and freight rates have increased, and additional ship-to-ship transfers to clear the strait are reducing tanker capacity," the strategist pointed out.

He said global oil inventories have fallen by more than 500 million barrels seen since February, largely due to drawdown in strategic reserves. Since most of the releases have now taken place, UBS expects commercial stocks to fall sharply.

Freight rates for tankers sailing from the Middle East to China have soared to $30-$40 a barrel, a sharp contrast to the $1-$3 range of the last decade. Chinese crude oil imports are also rising, possibly reaching 10 million barrels per day in October.

UBS concluded its outlook, saying: "Uncertainty around our forecasts remains high due to the unexpected Middle East conflict and the pace of recovery in Gulf production and global oil demand."

Key Tips for Brent Crude Traders

• UBS now sees Brent rising from $100 to $110/bbl by the end of the year.
• The mid-term 2027 target was also exceeded during March, June and September.
• Supply risks, declining inventories and rising freight rates are the main price drivers in the Middle East.
• Market volatility is expected to continue: ship strikes, high insurance and limited tanker space keep prices under pressure.
• Watch Chinese import levels and freight cost trends for additional signals.