Brent crude to stay sticky near-term before softening in 2027 on supply recovery: ICICI Bank Research
New Delhi, June 21
Brent crude is likely to hold in a USD 75-85/bbl band through the second half of 2026 as physical markets remain tight on pent-up demand and inventory replenishment, before shifting to a downside bias in 2027 when supply picks up sharply, ICICI Bank Research said in a research report.
ICICI Bank Research expects 2026 to remain supply-deficient while 2027 swings to surplus. "Hence, a net supply deficit of 1.6mbpd over 2026 would likely ensure that Brent Crude oil prices trade in the USD 75/bbl to USD 85/bbl range over 2H2026 and at an average of USD 85/bbl over all of 2026," the report said. "Going into 2027, supply is expected to pick up sharply that could ensure a supply surplus in the physical energy markets to the tune of 2mbpd ensuring that Brent crude prices trade with a downside bias. We see Brent Crude oil prices in USD 65-75/bbl range over all of 2027." The outlook is contingent on no further geopolitical disruptions and global growth holding near 3 per cent in 2027.
The report said energy prices dropped sharply after the US and Iran signed a memorandum of understanding for a 60-day ceasefire. Brent touched a three-month low of USD 79/bbl as the 14-point MoU included re-opening of the Strait of Hormuz with immediate effect, unfreezing of Iranian assets, and waivers to Iran to increase crude exports. "For the crude oil markets, the prospect of the re-opening of the SoH and possibly providing waivers to Iran could improve supply over the medium-term," the report noted.
Near-term stickiness is underpinned by tight physical balances. Since March-May, demand compressed by 4.7mbpd led by sharp declines in the US and China, while supply dropped by 13.6mbpd with 13mbpd from the GCC. The supply-demand imbalance deteriorated by ~9mbpd, but a sharp inventory drawdown of ~6mbpd helped stabilize the market. In May 2026, supply fell further by 0.8mbpd to 93.7mbpd as OPEC output dropped, pushing net supply deficit to 6mbpd. Inventory withdrawals averaged 15.98 mbpd between March and May, with the US drawing down 30 million barrels since February.
ICICI Bank Research said price trajectory will depend on pent-up demand, inventory replenishment and the pace of GCC output recovery. GCC production is expected to reach 82% of pre-conflict capacity by September 2026 and 90% by December 2026. For 2027, demand is projected to rise 1.9mbpd to 105.4mbpd, but supply could increase 5.5mbpd to 107.4mbpd as Iran gets waivers and UAE raises output, creating a 2mbpd surplus and capping prices.
— ANI
Reader Comments
I appreciate the detailed forecast, but the 'contingent on no further geopolitical disruptions' is a big IF. We all know how quickly the Middle East can change. India should really accelerate its renewable energy push and electric vehicle adoption to reduce our vulnerability to such fluctuations. No more excuses for delay.
Interesting report. The 6 mbpd inventory drawdown is massive! Shows how sensitive the market is. For India, every $1 drop in oil prices saves us billions in import bills. Let's hope 2027 forecast of USD 65-75 range materializes. Also, good to see Iran getting waivers - that could bring some stability.
The Strait of Hormuz reopening is a game-changer. But will the US-Iran MoU hold? Knowing the track record, I'm skeptical. India needs to diversify its energy imports - maybe more from Russia, Africa, and Latin America. Relying on the Gulf is risky business. Also, why are we still so dependent on oil? Time to think nuclear and solar!
Solid research. The supply surplus forecast for 2027 makes sense if Iran and UAE ramp up. But as an energy trader, I'm watching OPEC+ discipline closely. If they stick to quotas, we might not see such a big surplus. India should definitely lock in long-term contracts at current levels if possible.
This is all well and good for the markets, but for common people like us, the real impact is on inflation. Petrol, diesel, LPG - everything becomes expensive. Middle-class budgets are already stretched. I hope the government uses this forecast to plan ahead
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