BMI has sharply raised its Brent crude oil price forecasts for 2026 and 2027, expecting prolonged disruptions to Middle East oil flows and declining global inventories to keep prices elevated into early next year.
The research house lifted its 2026 average Brent forecast to US$93 per barrel from US$83, while raising its 2027 forecast to US$81 from US$71. The revision reflects BMI’s changed assessment of the US-Iran conflict, with the firm now expecting a preliminary agreement to reopen the Strait of Hormuz only in the first quarter of 2027 rather than during 3Q26.
BMI expects Brent to average US$107 per barrel in 4Q26 and US$112 in 1Q27, compared with US$91 in 3Q26, as tighter crude availability and shrinking physical market buffers leave prices increasingly vulnerable to renewed geopolitical disruption and unplanned outages.
Extended disruption to regional exports, combined with supply constraints linked to the Russia-Ukraine war, depleted inventories and strong refining margins, is expected to maintain pressure on crude markets over the next three to six months.
BMI said strategic stock releases and new supply additions are unlikely to fully offset the deficit, resulting in further inventory drawdowns. It consequently expects oil prices to trend higher through repeated cycles of escalation and de-escalation as the market operates with progressively thinner buffers.
Physical Market Remains Tight
Despite some recent softness in Brent futures, BMI said physical market indicators continue to signal significant tightness.
The Brent futures curve remains heavily backwardated, while physical crude continues to command a sizeable premium over futures prices. The research house said recent weakness was partly related to the restart of Saudi Arabia’s East-West pipeline and renewed optimism over diplomacy, rather than a fundamental easing in supply conditions.
Oil flows from the Middle East Gulf have improved but remain difficult to assess, with estimates of supply losses varying widely.
BMI expects both Red Sea and Strait of Hormuz flows to remain highly insecure through 4Q26 and 1Q27, adding that full normalisation could take six to 12 weeks even after a preliminary agreement is reached.
Outside the Gulf, spare production capacity has largely been exhausted, while the pipeline of new projects expected to start production over the coming months remains limited. US shale has also delivered only a muted supply response.
Refined fuel markets are similarly stretched. BMI said diesel cracks have reached record levels and expects refinery utilisation to remain high as operators respond to depleted inventories and strong margins, keeping demand for crude elevated.
Sharp Price Retreat Expected After Deal
Despite its bullish near-term outlook, BMI becomes substantially more bearish once Middle East supply conditions normalise.
Following an assumed preliminary agreement in 1Q27, the research house expects Brent to fall sharply to an average US$77 per barrel in 2Q27, US$70 in 3Q27 and US$67 in 4Q27.
BMI expects annual global oil production to rise 10.5% year-on-year in 2027, compared with only 1.2% growth in end-use demand, as Gulf output recovers alongside increases from US shale, Latin America and Venezuela.
Further out, Brent is currently forecast to average around US$70 per barrel between 2028 and 2030, although BMI said risks to its longer-term outlook are tilted to the downside as electrification, greater energy efficiency and decarbonisation slow demand growth while supply continues expanding.
The biggest uncertainty remains the trajectory of the US-Iran conflict. A renewed escalation affecting regional energy infrastructure and shipping could push prices materially higher, while an earlier diplomatic breakthrough and stronger recovery in Gulf exports would accelerate the anticipated decline.
