Barclays: Delay in Hormuz flow recovery poses upside risks to $85/b Brent forecast

Barclays on Thursday said that a swift normalization ​of flows through the Strait ​of Hormuz aligns with its forecast of Brent crude ​oil averaging $85 a barrel in 2026, but warned that delays in restoring traffic or any further escalation could push prices higher from current levels. Flows through the Strait ‌of Hormuz ⁠have ⁠stayed subdued despite the ceasefire announcement, and recent data supports their estimate of supply disruptions ​at around 13-14 million barrels per day, Amarpreet Singh, energy analyst at the British ​bank said.

"There has been some pushback however, as some market participants have been pointing to the inventory data to suggest that demand might have ​already adjusted enough to keep a lid ⁠on prices from ‌here. We do not think so."

The bank noted ​that estimates ​of global inventory balances were likely 1-2 million bpd ⁠tighter than expected going into the conflict, leaving more ​than sufficient room for some demand compression under its ​baseline scenario.


Therefore, barring a broader slowdown in demand, it maintains its $85 per barrel view for Brent this year and still sees upside risks to prices.

Oil prices rose over 3% on Thursday as doubts over a fragile two-week Middle East ceasefire raised concerns that energy flows through ‌the crucial Strait of Hormuz will remain restricted.

Both benchmarks fell below $100 per barrel in the previous trading session, ​with WTI ​recording its biggest ⁠decline since April 2020, on optimism the ceasefire would result in reopening of the strait. But there was no sign Iran had lifted its blockade of ​the Strait of Hormuz, which has caused the worst disruption to global energy supplies in history.

Barclays still expects Brent to average $80/bbl in the fourth quarter this year in its baseline scenario, and suggested that markets are likely largely priced for the normalization outcome.