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Investing.com - UBS has lowered its Brent crude oil forecasts, with the Swiss bank citing higher supply from South America and resilient output from sanctioned countries compared to earlier expectations of a decline.
“We modestly lower our oil forecasts,” said analysts at UBS, in a note dated Aug. 11. “While we still expect Brent to trade unchanged at $68/bbl at end-September, we now see a decline to $62/bbl by end-2025 and March 2026 before a recovery to $65/bbl by mid-2026 (previously all forecasts were at $68/bbl), where it will likely stay around in 2H26.”
The bank also narrows the WTI discount to Brent to $3/bbl from $4/bbl previously.
At 08:15 ET (12:15 GMT), Brent oil futures fell 0.8% to $66.08 a barrel, while West Texas Intermediate crude futures fell 0.8% to $62.47 a barrel.
South American oil production has seen strong growth in recent months, with Brazilian oil production reaching a new record high following a disappointing 2024.
Also, the U.S. administration has granted Chevron (NYSE:CVX) a license to operate again in Venezuela, and thus UBS doesn’t expect the country’s production to fall anymore.
At the same time, in case of Russia, U.S. President Trump only put an extra tariff of 25% on India for buying Russian oil, while not targeting other buyers. Also, production in Iran remains at a multi-year high.
On the demand side, Indian oil consumption—the country is the third-largest consumer—contracted year-over-year in July.
“We expect global oil demand to set a peak for the year this month, and modestly decline over the coming months. As a result of this we should expect larger inventory builds at the start of 2026, resulting in Brent declining towards the lower end of the $60-70/bbl trading range,” said UBS.
The Swiss bank noted that OPEC+ crude exports in July were below the group’s exports in March, before the eight OPEC+ member states with additional voluntary production cuts decided to unwind their production cuts.
“Hot weather in the Middle East, resulting in higher domestic consumption, and smaller effective production increases are likely important drivers of this pattern,” UBS said. “After the full unwind of one layer of its production cuts of 2.2mbpd, we expect the group to hold production unchanged unless larger and lasting supply disruptions emerge.”
UBS retains a more constructive outlook for mid-2026 and second-half 2026 prices.
“On the one hand we already see lower U.S. supply growth at current prices. By mid-2026, the market focus will likely shift to 2027, with modest supply growth expected in non-OPEC+ countries while demand is still expected to grow.”