Oil Prices Poised to Surge on Supply Bottlenecks and Middle East Tensions
Oil prices are expected to surge due to supply shortages and Middle East tensions, according to Hong Leong Investment Bank (HLIB) Research. The research firm has maintained its bullish outlook for crude oil prices, driven by worsening supply bottlenecks and geopolitical tensions in the region.
The Brent crude futures contract price has returned above $100 a barrel, with severe disruption scenarios potentially pushing prices towards $120. HLIB Research has raised its 2026 average Brent price assumption to $90 a barrel (up from $80), expecting prices to trade around $95 to $100 towards the end of the year.
The research firm expects the upside to crude prices to be underpinned by several factors, including severe chokepoint and route bottlenecks. Traffic through the Strait of Hormuz dropped to below 10% of pre-war levels between July and September, while alternative rerouting is constrained after drone attacks temporarily shut Saudi Arabia's 1,200km East-West Pipeline.
Global crude oil deficit expanded sharply to approximately 4.1 million barrels per day (bpd) in August from around 0.1 million bpd in July, and is projected to reach close to 4.8 million bpd in September. Crude output from the Middle East region fell 7.8% month-on-month (m-o-m), with regional production shut-ins rising to 6.7 million bpd in August from five million bpd in July.
HLIB Research also noted that China's oil consumption is projected to expand to 16.4 million bpd in September, and the country has diversified its sourcing options to suppliers like Russia.