Barclays maintains its 2026 Brent forecast at $100/b and provides a 2027 forecast of $88/b for the first time
AI summary card
Barclays maintains its 2026 Brent forecast at $100/b and provides a 2027 forecast of $88/b for the first time
Under the base-case assumption that free navigation through the Strait of Hormuz resumes by the end of this month, the report maintains the view that Brent should trade above the forward curve and presents higher oil price scenarios if the restoration of navigation is delayed until the end of July or the end of August.
- The base case assumes free navigation through the Strait of Hormuz resumes by the end of this month, keeping the 2026 average Brent price at $100/b and setting the 2027 average at $88/b.
- If normalization of navigation is delayed until the end of July, the average Brent prices in 2026 and 2027 are expected to be $105/b and $95/b, respectively; if delayed until the end of August, they are expected to be $110/b and $105/b, respectively.
- Seasonally adjusted observable global oil inventories have declined at a pace of 4.5 mb/d over the past eight weeks; based on the historical beta, this implies a current market deficit of about 7 mb/d.
- The report notes that China's oil demand fell 12% YoY in April, but tightening U.S. commercial crude inventories and Cushing storage utilization still support oil prices.
Report interpretation
Overview
This is a macro commodities research report from Barclays FICC Commodities Research on the crude oil market and Brent price forecasts. The report's core view is that under the base assumption of free navigation through the Strait of Hormuz resuming by the end of this month, Brent prices should still be significantly above the forward curve, with the 2026 average maintained at $100/b and a 2027 average of $88/b provided for the first time.
Core views
Barclays believes current oil prices do not represent a new equilibrium, and that the Strait of Hormuz cannot remain closed for an extended period while oil prices stay at only $100/b. Although managed fund positioning and implied volatility have fallen back to pre-war levels and China demand has been weaker than expected, inventories are still declining, the market deficit is estimated at about 7 mb/d, and U.S. commercial crude inventories and Cushing utilization are tightening further, indicating that supply-demand fundamentals remain tight. If the timeline for restoring navigation is delayed, Brent price forecasts will be revised higher.
Analysis framework
The report uses bottom-up supply-demand balance forecasts, a historical beta mapping between inventory changes and market imbalance, and scenario analysis of the navigation timeline through the Strait of Hormuz. It also monitors managed fund positioning, implied volatility, China demand, visible inventories, U.S. commercial crude inventories, and Cushing utilization to assess whether prices adequately reflect fundamental pressure.
Methodology notes
Using the resumption of free navigation through the Strait of Hormuz by the end of this month as the base assumption to estimate average Brent prices for 2026 and 2027.
Under this base case, Barclays maintains its 2026 Brent forecast at $100/b and provides a 2027 forecast of $88/b for the first time, while also noting that a sizable surplus may emerge in 2027 after the strait reopens.
Delaying the restoration of navigation through the Strait of Hormuz until the end of July or the end of August to calculate Brent upside scenarios.
If restoration is delayed until the end of July, average Brent prices in 2026 and 2027 are expected to be $105/b and $95/b; if delayed until the end of August, they are expected to be $110/b and $105/b.
Using the pace of decline in observable inventories and its historical beta versus estimated imbalance to infer the current market deficit.
The global total oil inventory indicator shows that, after seasonal adjustment, inventories declined by about 4.5 mb/d over the past eight weeks; based on historical relationships, this implies a current market deficit of about 7 mb/d, broadly consistent with bottom-up supply-demand estimates.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Brent crudeCore forecast asset
- Strengths
- Continued declines in global inventories, an estimated market deficit of about 7 mb/d, and the risk of delayed navigation restoration all support Brent trading above the forward curve.
- Weaknesses
- If navigation through the Strait of Hormuz resumes quickly, the report's own supply-demand balance shows that a sizable surplus may emerge in 2027.
- Comparison
- The forecasts of $100/b in 2026 and $88/b in 2027 are $9/b and $7/b above the forward curve at the time, respectively.
- Risks
- Weaker China demand, earlier-than-expected restoration of the strait, a slower pace of inventory declines, or fading market risk premium.
- WTI and Cushing inventoriesU.S. inventories and pressure at the pricing hub provide supporting evidence for the oil price view
- Strengths
- Cushing utilization is near lows since 2010, and U.S. commercial crude inventories measured in refinery demand days could fall below the 20-year low within 8-10 weeks.
- Weaknesses
- WTI is not the primary forecast target in this report, and regional inventory constraints may not fully transmit to global Brent pricing.
- Comparison
- Compared with the Brent forecast, WTI-related content mainly serves as a validation indicator of the degree of tightness in U.S. inventories.
- Risks
- Changes in U.S. refinery demand, pipeline fill adjustments, SPR changes, or regional inventory replenishment could weaken the support.
- Energy-related assetsAffected by crude prices, supply-demand deficits, and geopolitical transportation risks
- Strengths
- High oil prices and tight supply-demand conditions usually benefit upstream energy cash flows and inflation-linked assets.
- Weaknesses
- A potential 2027 surplus and uncertainty around China demand could pressure medium-term valuations.
- Comparison
- The report focuses on commodity prices rather than stocks or sector ratings, so it does not directly provide a relative return view on energy equities.
- Risks
- Higher-than-expected demand elasticity, non-OPEC supply growth, use of OPEC spare capacity, and easing geopolitical risks.
Key data
- 2026 Brent Forecast$100/b$9/b above the forward curve at the time of the report.
- 2027 Brent Forecast$88/b$7/b above the forward curve at the time of the report.
- Scenario: Navigation Delayed Until End-July2026 $105/b; 2027 $95/bCorresponds to free navigation through the Strait of Hormuz resuming one month later than the base case.
- Scenario: Navigation Delayed Until End-August2026 $110/b; 2027 $105/bCorresponds to a longer-lasting strait disruption scenario.
- Global Inventory Decline Pace4.5 mb/dSeasonally adjusted decline pace in observable inventories over the past eight weeks.
- Estimated Market Deficit7 mb/dDerived from the historical beta between inventory declines and estimated imbalance.
- China April Oil DemandYoY -12%Still up 2% YoY in the first four months of 2026, suggesting that demand elasticity and lagging activity indicators need to be interpreted cautiously.
- Change in U.S. Commercial Crude InventoriesDown 323 mb vs. 2008After adjusting for the SPR decline and increased pipeline fill, U.S. commercial crude inventories have fallen significantly; commercial inventories stood at 301 mb at the end of 2008.
- U.S. Inventory Tightness Time Window8-10 weeksAt the recent pace, U.S. commercial crude inventories measured in refinery demand days could fall below the 20-year low.
Impact & implications
The report's investment implication leans toward upside risk in Brent prices: if normalization of the Strait of Hormuz is delayed, oil price forecasts will be revised up materially; even under the base case of restored navigation, short-term inventory declines and tight U.S. inventories keep the Brent forecast above the forward curve. However, a large surplus could emerge in 2027 after the strait reopens, and weaker-than-expected China demand could limit the sustainability of further oil price gains.
Risks
- The timing of the resumption of free navigation through the Strait of Hormuz, whether earlier or later than the base assumption, will alter the Brent price path.
- China oil demand being significantly weaker than expected may reflect higher price elasticity of demand or the lagged impact of activity indicators.
- If supply recovers after the strait reopens, Barclays' own balance sheet shows that a sizable surplus could emerge in 2027.
- The decline in managed fund positioning and implied volatility indicates that the market lacks a strong consensus on the persistence of the current situation.
- Inventories, third-party data, and the forward curve are all point-in-time measures, and the report's price view may change as market conditions evolve.
What to watch
- Whether free navigation through the Strait of Hormuz can resume by the end of this month, or whether it is delayed until the end of July or the end of August.
- Whether the pace of decline in observable global oil inventories continues to remain elevated.
- Whether China oil demand and visible inventories continue to show weakness or indicate stockpiling behavior.
- Whether U.S. commercial crude inventories measured in refinery demand days fall below the 20-year low.
- Whether Cushing, OK utilization moves further toward lows since 2010.
- Whether demand growth in 2027 continues to outpace non-OPEC supply growth, and the extent of UAE spare capacity usage.
- Whether the Brent forward curve, managed fund positioning, and implied volatility once again reflect a higher risk premium.