Crude oil prices are likely to remain elevated in the near term as disruptions to flows through the Strait of Hormuz have triggered a sharp drawdown in global inventories, even as the outlook beyond the current quarter remains dependent on the pace of supply restoration, according to a note by the US Energy Information Administration (EIA) and analysts at Rabobank International.

The EIA expects Brent crude to average around $85 a barrel (bbl) in the third quarter of 2026 (Q3-CY26), $11 a barrel higher than its previous estimate.

It estimates that global oil inventories declined by an average 4.2 million barrels per day (b/d) between the April – June 2026 quarter (Q2-CY26) and expects a further drawdown of 3.8 million b/d on average in Q3-CY26.

The agency expects prices to ease once traffic through the Strait of Hormuz gradually recovers and ‘shut-in’ oil production starts coming back.

It forecasts Brent to average $78 a barrel in the fourth quarter of 2026. “As global inventories begin to rebuild, oil prices are expected to decline gradually, with Brent forecast to average $69/bbl in 2027,” the EIA note said.

Since the West Asia conflict began earlier in 2026, Brent crude oil prices rose from around $70/bbl to hit a high of over $120/bbl before cooling off to the levels seen pre-war as the tensions between the US and Iran showed signs of easing. However, a stalemate as regards the Strait of Hormuz triggered a climb back to $86/bbl now.

Bullish stance
Rabobank, however, has a more bullish outlook on prices over the next few quarters. It has raised its Brent forecast to $90/bbl for both the third and fourth quarters of 2026, from its earlier estimates of around $88/bbl and $86/bbl. Its forecast for 2027 has also been raised to $86 a barrel, while the 2028 estimate has been increased to $79 a barrel.

Their analysts, Joe DeLaura and Florence Schmit said August has brought a new equilibrium marked by economic sanctions and low-scale conflict between the US and Iran, but see little progress towards resolving the broader geopolitical tensions.

They also believe a short-term agreement to reopen the Strait of Hormuz for commercial shipping is unlikely at present, given the limited common ground between the US and Iran.

Rabobank expects Brent to remain volatile in the months ahead, with $70-$75/bbl acting as the lower-end support zone and $95-$100 forming the upper end of the range. “However, a renewed disruption to oil flows through the Strait of Hormuz or the Bab el-Mandab strait could push prices above $100/bbl,” it said.

The immediate direction of prices, therefore, is likely to hinge on developments around key shipping routes and the pace at which disrupted oil production and flows are restored.

Source: Business Standard