UBS cuts Brent crude outlook due to strong supply.

UBS Group is turning cautious on the crude oil market, stating that current prices should be at the higher end of the $60 to $70 range, but will gradually decline later this year. UBS currently expects Brent crude prices to drop to $62 by the end of 2025 and March 2026, then rise to $65 by mid-2026. The bank also expects the discount of West Texas Intermediate crude relative to Brent crude to narrow from $4 to $3. Strategist Giovanni Staunovo pointed out that increased production in Brazil and Guyana, steady crude oil supplies from Iran, Venezuela, and Russia, and weaker-than-expected demand from India are the reasons behind this forecast. UBS predicts that unless there is a persistent supply disruption, OPEC+ will halt further production adjustments. Investors are digesting the news that OPEC+ will increase production by 547,000 barrels per day in September, while also concerned that US import tariffs could dampen global economic growth, following the most severe weekly drop in oil prices since June. Weaker differentials and narrowing WTI discounts are resetting the profit and capital expenditure calculations for producers and refiners, while also suppressing fuel costs for consumers. UBS is cautious in the short term, but expects stability by mid-2026, with OPEC+ guidance and demand data serving as the next catalyst.