Bank of America says Brent crude could top $150 a barrel if the Iran conflict keeps disrupting supply, after already raising its second-half forecast to $95. The bank points to shrinking global inventories and shipping constraints through the Strait of Hormuz as the driving forces behind the risk.
Bank of America now expects Brent crude to touch $95 a barrel in the second half of this year, up from a prior forecast of $83. But the bank warns actual prices could go much higher: Brent could top $150 a barrel if the disruptions tied to the U.S.-Iran conflict continue into next spring or if oil infrastructure takes further damage.
Supply squeezed on several fronts
The bank cites constrained shipments through the Strait of Hormuz and Bab-el-Mandeb, refinery outages, lower exports from the Middle East and Russia, and tightened product exports from China as the factors behind the tighter market. Francisco Blanch, commodity and derivatives strategist at Bank of America, warned the disruptions could morph into a "structural shock."
Blanch said Organization for Economic Co-operation and Development strategic reserves have already fallen substantially, and physical crude is commanding large premiums over benchmark futures. He added that U.S. refiners and fuel exporters have partly filled the gap, but ultra-low product stocks and elevated refining margins show the system has very limited spare capacity.
Hormuz disruptions and shrinking stockpiles
Bank of America estimates disruptions through the Strait of Hormuz peaked at roughly 14 million barrels per day. They have recently averaged between 4 million and 8 million barrels per day compared with prewar levels. Blanch estimates at least 350 million barrels have disappeared from global above-ground oil inventories since levels peaked in March. Stocks are now about 200 million barrels short of record seasonal lows.
Physical crude markets are already signaling acute near-term scarcity through extreme backwardation, Blanch said, even as continued inventory draws support an average Brent price of around $80 a barrel in 2027.
Source: CNBC
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