Brent: Risk premium holds as Persian Gulf flows rise – ING
ING’s Warren Patterson notes that Oil prices remain firm even as Persian Gulf supply recovers toward pre-war levels. He argues market concern over sustainability of these flows and the absence of a US-Iran deal are keeping a sizeable risk premium in Brent. ING maintains a low-conviction Brent forecast of $80/bbl for 4Q26 and $71/bbl for FY27, expecting lower prices into year-end.
Brent risk premium and supply outlook
"The fact that oil prices are well-supported despite the improvement in flows from the region appears to reflect concerns over how sustainable this supply is, particularly when considering the geopolitical backdrop. The market continues to price in a large risk premium in the absence of a deal between the US and Iran. And to see this risk premium erode, the market may need the comfort of a deal."
"Failing that, time may be enough for oil prices to trend lower, assuming supplies from the region continue to hold up. For now, we are holding onto our 4Q26 Brent forecast of $80/bbl and FY27 forecast of $71/bbl. However, given the high level of uncertainty, this is a low-conviction call, specifically for 4Q26."
"Oil prices remain firm despite rising supply from the Persian Gulf. We expect oil prices to trade lower into year-end. More positive signs of a potential US-Iran deal would give us more confidence in this view."
"As oil flows from the Persian Gulf have picked up, another bottleneck has become increasingly noticeable in the oil market. There is significant tightness in the tanker market, which has seen tanker freight rates surge to record levels. Oil flows from the Persian Gulf have become increasingly inefficient due to the challenging environment, which has absorbed more of the global tanker fleet."
"The other pain point for the oil market remains diesel, which will be a concern as we head further into the Northern Hemisphere winter. Disruptions from the Persian Gulf and Russia have tightened the market, while the risk of export restrictions from the US has kept the market nervous. The risk of US export restrictions appears to have subsided, with Europe set to release diesel from strategic reserves."
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