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Brent crude is likely to hold in a USD 75-85/bbl band through the second half of 2026 as physical markets remain tight on pent-up demand and inventory replenishment, before shifting to a downside bias in 2027 when supply picks up sharply, ICICI Bank Research said in a research report.
ICICI Bank Research expects 2026 to remain supply-deficient while 2027 swings to surplus. "Hence, a net supply deficit of 1.6mbpd over 2026 would likely ensure that Brent Crude oil prices trade in the USD 75/bbl to USD 85/bbl range over 2H2026 and at an average of USD 85/bbl over all of 2026," the report said. "Going into 2027, supply is expected to pick up sharply that could ensure a supply surplus in the physical energy markets to the tune of 2mbpd ensuring that Brent crude prices trade with a downside bias. We see Brent Crude oil prices in USD 65-75/bbl range over all of 2027." The outlook is contingent on no further geopolitical disruptions and global growth holding near 3 per cent in 2027. The report said energy prices dropped sharply after the US and Iran signed a memorandum of understanding for a 60-day ceasefire. Brent touched a three-month low of USD 79/bbl as the 14-point MoU included re-opening of the Strait of Hormuz with immediate effect, unfreezing of Iranian assets, and waivers to Iran to increase crude exports. "For the crude oil markets, the prospect of the re-opening of the SoH and possibly providing waivers to Iran could improve supply over the medium-term," the report noted. Near-term stickiness is underpinned by tight physical balances. Since March-May, demand compressed by 4.7mbpd led by sharp declines in the US and China, while supply dropped by 13.6mbpd with 13mbpd from the GCC. The supply-demand imbalance deteriorated by ~9mbpd, but a sharp inventory drawdown of ~6mbpd helped stabilize the market. In May 2026, supply fell further by 0.8mbpd to 93.7mbpd as OPEC output dropped, pushing net supply deficit to 6mbpd. Inventory withdrawals averaged 15.98 mbpd between March and May, with the US drawing down 30 million barrels since February. ICICI Bank Research said price trajectory will depend on pent-up demand, inventory replenishment and the pace of GCC output recovery. GCC production is expected to reach 82% of pre-conflict capacity by September 2026 and 90% by December 2026. For 2027, demand is projected to rise 1.9mbpd to 105.4mbpd, but supply could increase 5.5mbpd to 107.4mbpd as Iran gets waivers and UAE raises output, creating a 2mbpd surplus and capping prices. (ANI)
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