UBS raises oil price forecasts amid shipping and supply risks

UBS has raised its oil price forecasts through 2027, projecting Brent crude to hold near $110 per barrel by the end of the year. The bank suggests the market's primary challenge has shifted from production shortages to logistical constraints.

Record attacks on shipping near the Strait of Hormuz, including at least 30 reported incidents in October, have increased freight rates and squeezed tanker capacity. Additionally, global inventories have dropped significantly, with a decline of 509 million barrels since February.

Analysts note that the market has lost key shock absorbers, such as strategic reserve releases and previous lows in Chinese demand, as Chinese crude imports have recovered. These factors, combined with geopolitical risk premiums stemming from Middle East tensions and the Russia-Ukraine conflict, continue to exert upward pressure on prices. High energy costs are also cited as a persistent inflationary driver that could impact central bank decisions and broader economic stability.