UBS has lowered its oil price forecast. Why does the bank now expect it to be closer to $60?

UBS on August 11 worsened its forecast for oil prices. Switzerland's largest bank now expects that by the end of 2025 the cost of the benchmark grade Brent will shift from the upper boundary of the range of $60-$70 per barrel to the lower boundary.

According to UBS, the cost of Brent will stay near $70 per barrel for some time, but then will begin to fall. In the updated forecast the bank assumes that from the end of 2025 to March 2026 Brent will be traded at $62. In the spring of 2026, oil prices will begin to recover, by July will reach $65 per barrel and, most likely, there and will remain in the second half of 2026, reports Seeking Alpha. Earlier UBS forecast for the end of 2025, March and mid-2026 was the same - $68 per barrel, notes the edition.

The main reasons for the forecast change are higher-than-expected supplies from South America, as well as steady production levels in Venezuela, Russia and other countries under sanctions, where UBS had previously forecast a decline, said the bank's strategist Giovanni Staunovo. Weaker-than-expected demand in India is also contributing to lower oil prices, he added.

Futures for Brent and North American WTI, which fell by 4.4% last week, went into a slight plus on August 11. Investors are waiting for talks between the US and Russian presidents on a ceasefire in Ukraine, which are due to take place this week.

The meeting between Donald Trump and Vladimir Putin will mark the beginning of a long negotiation process - and as long as the negotiations are ongoing, Russian oil supplies will not be threatened by US sanctions, according to Bjarne Schildrop, chief commodities analyst at SEB. "It is extremely unlikely that Trump will impose sanctions on Russian oil while this [negotiation] process is going on, meaning no disruptions in oil supplies from Russia are expected," Schildrop told Bloomberg news agency.

Trump said late last week that he would meet Putin in Alaska on Aug. 15 for talks on ending the military conflict in Ukraine. Trump's ultimatum to the Kremlin to either agree to peace or face secondary sanctions on its oil buyers expired on August 8.

In fact, there are now only two major buyers of Russian oil - China and India, writes Reuters. Trump is having a hard time getting Beijing to give up buying hydrocarbons from Russia, so he is putting pressure on New Delhi. On August 6, the US president, referring to Russian oil supplies to India, threatened to raise duties on Indian imports from August 28. But the weak reaction of the oil market on this matter indicates the confidence of its participants that the situation with Trump, India and Russia will end with another TACO - an acronym for the expression Trump Always Chickens Out, the agency notes.

This article was AI-translated and verified by a human editor