BAKU, Azerbaijan, October 5. Fitch
Solutions has raised its forecast for the average price of Brent
crude futures in 2026 from $83 to $93 per barrel and its 2027
forecast from $71 to $81 per barrel.
According to the Fitch Solutions forecast, the
revision reflects a change in expectations regarding the US-Iran
war. While analysts previously expected a preliminary agreement to
reopen the Strait of Hormuz to be reached in the third quarter of
2026, they now consider such an agreement unlikely before the first
quarter of 2027.
Under Fitch Solutions’ scenario, the probability of a
preliminary agreement being reached is estimated at 70%.
“The probability of it being reached in the fourth
quarter of 2026 is 25%, in the first quarter of 2027 is 40%, and in
the second quarter of 2027 is 5%,” the forecast said.
“The probability of escalation is estimated at 30%.
This scenario assumes a return to high-intensity hostilities in the
Middle East.
Two further scenarios are also considered after a
preliminary agreement is reached. The probability of a final
agreement is estimated at 40%, assuming that the preliminary
agreement remains in place, the situation in the Strait of Hormuz
gradually normalizes, and negotiations on long-term issues,
including the nuclear program and sanctions, continue.
The probability of a Stop-Start Cycle scenario,
involving periodic breakdowns and resumption of negotiations, is
estimated at 30%. It assumes violations of the preliminary
agreement or an end to negotiations on a final agreement, followed
by a return to difficult negotiations or escalation,” Fitch
Solutions said.
Fitch Solutions expects continued disruptions to
regional oil supplies to put upward pressure on prices over the
next three to six months. Analysts estimate that the situation will
be exacerbated by ongoing supply constraints related to the
Russia-Ukraine conflict.
“Depleting inventories, high refining margins and
expectations of a longer conflict will encourage refiners to
increase utilization rates, boosting demand for crude oil.
“At the same time, limited releases from strategic
reserves and new production capacity will be insufficient to
eliminate the ongoing deficit, while global inventories will
continue to decline.
“As a result, prices will move higher in a zigzag
pattern, with recurring cycles of escalation and de-escalation
between Washington and Tehran occurring against a backdrop of
gradually declining inventories and fewer fundamental factors
limiting further price increases,” Fitch Solutions said.
Fitch Solutions now forecasts an average Brent price
of $107 per barrel in the fourth quarter of 2026 and $112 per
barrel in the first quarter of 2027, compared with $91 per barrel
in the third quarter of 2026 and $89 per barrel on average
year-to-date.
According to the forecast, rising demand for crude
oil and continued supply constraints will reduce available
physical-market inventories, increasing Brent’s sensitivity to new
geopolitical flare-ups and unplanned production disruptions.
“For most of September, the front-month Brent futures
contract traded in a range of $100–$110 per barrel. The price
reached a high of $108.8 per barrel at the close on September 15,
before falling to $104 on September 30.
“The shift to the December contract as the
front-month contract, along with a series of negative market
developments, pushed Brent below $100 per barrel in intraday
trading on October 1. By the end of the day, the price had risen
back above $102 per barrel,” Fitch Solutions said.
Fitch Solutions noted a significant divergence in
assessments of the state of the oil market, with some participants
pointing to extremely tight supply while others expect a
surplus.
“According to analysts, market sentiment has
gradually become more bullish on prices in recent months. The ratio
of asset managers’ long to short positions in Brent futures
increased from 1.6 in early July to 4.1 in mid-September. However,
the recent shift in market positioning and the decline in prices
since mid-September create risks for the short-term forecast.
“Current Brent price dynamics indicate market
weakness, while the futures curve remains in pronounced
backwardation, which typically signals tight supply in the
near-term market.
“In addition, physically delivered contracts are once
again trading at a substantial premium to the futures market, which
analysts say also points to tight fundamentals.
“Fitch Solutions attributes part of the recent
decline in the front-month Brent futures price to the resumption of
operations on the East-West pipeline and renewed optimism over the
prospects for a US-Iran agreement.
“This is part of the fluctuations that Fitch
Solutions’ country-risk analysts expect during the conflict, as
Washington and Tehran alternate between escalation and diplomatic
efforts, with oil markets responding accordingly,” the forecast
said.
According to Fitch Solutions, if analysts’
fundamental assumptions prove correct, the factors that have so far
limited a stronger rise in Brent prices will gradually weaken. New
cycles will be characterized by progressively higher price highs
and lows amid an increasing risk of further disruptions to physical
oil supplies.
