Oil prices are expected to slide into the $70s per barrel this year and further into the $60s in 2027, according to Julius Baer, amid rising supply by the Gulf countries even as geopolitical tensions between the US and Iran continue to inject a risk premium into the market.
Norbert Rücker, head of economics and next generation research at Julius Baer, said in a note that the diplomatic gridlock and ongoing power games between Washington and Tehran have kept uncertainty elevated, but the underlying fundamentals of the oil market point to a more benign supply outlook than many had anticipated.
Globally, WTI and Brent closed at $82.40 and $88.52 per barrel on Friday, up 1.42 per cent and 1.67 per cent, respectively, due to attacks on the oil ships in the Strait of Hormuz.
On Saturday, Adnoc confirmed that one of its vessels was attacked while transiting the Strait of Hormuz on the evening of Friday, August 14. The incident resulted in no injuries, and the situation has been brought under control.
In a statement, Adnoc stressed the importance of protecting the safety and well-being of seafarers, while safeguarding freedom of navigation and maritime security.
Citing the latest monthly and weekly updates from the International Energy Agency and the US Energy Information Administration, Rücker noted that global and US oil inventories are holding up far better than feared.
Demand stays resilient
He attributed this partly to softer global demand and to continued, and at times hidden, flows of crude through the Strait of Hormuz.
While consumer demand has remained resilient across Western markets, Rücker said other regions, particularly Southeast Asia, could be experiencing more prolonged softness in oil demand, though he cautioned that data to confirm this trend remains limited.
Despite recent military clashes in the region, oil transits through the Strait of Hormuz have largely held up, the note said. Asian buyers, including China and India, have shown less hesitation in sourcing crude from the Gulf, with Rücker suggesting that Iran continues to serve as a reliable supplier for some importers.
He pointed to a recent US official estimate of nine million barrels per day in Hormuz exports as notably high, adding that current export volumes are likely running ahead of levels seen in June, before a related memorandum was signed. Rücker also flagged that the movement of oil through the strait via smaller vessels operating without transponder signals is complicating efforts to track flows using conventional satellite and shipping-data methods.
Adding to the improved supply picture, releases from strategic petroleum reserves have reached roughly half of the volumes originally pledged in March, according to the note.
Given the more benign supply outlook and expectations that pragmatism will continue to support oil flows out of the Middle East, Julius Baer said it is maintaining its “Cautious” view and short position on oil.
Oil exports recovery
Meanwhile, despite extended disruption, Oxford Economics expects prices to trend down and Gulf exports to gradually recover as intermittent Strait transit, informal arrangements, and additional bypass capacity reduce lost supply, while ample global inventories and subdued Chinese demand continue to cushion the market.
“A durable peace deal (in the Middle East) could restore shipping more quickly and push prices sharply lower. However, renewed escalation could further reduce global supply through damage to energy infrastructure and greater threats to shipping through both Hormuz and the Red Sea,” it said in its latest research.
“We expect Gulf exports to recover gradually, even as uncertainty over the Strait persists. Regional producers have strong incentives to restore lost export revenues, and adaptation is already underway through continued Hormuz transit and greater use of alternative export routes,” it added.
UAE crude exports continue to increase as the country looks to tap alternative routes amid the closure of Hormuz, aiming to reach five million barrels of oil exports a day.
Importantly, Saudi Arabia is shifting to the Suez Canal for oil exports to key customers due to attacks by Houthis in the Red Sea.
Source: Khaleej Times