Wall Street Concludes on Oil Surplus in 2027.. Price Predictions Ranging from $60 to $75 per Barrel

SadaNews - Major investment banks on "Wall Street" have agreed in reports published since the ceasefire between the U.S. and Iran that the largest supply shock in the history of the oil market will turn into its opposite: a surplus ranging between 3 to 4.8 million barrels per day in 2027, with the recovery of shipping traffic through the Strait of Hormuz happening faster than expected, continued high U.S. exports, and weakened Chinese imports.

However, they differ on the extent of the decline in the price of Brent crude, projected to range from $64 to $75 per barrel for 2027, with varying estimates of market needs to rebuild strategic reserves that were depleted during the crisis that lasted over a hundred days, causing a supply deficit of more than a billion barrels, equivalent to ten days of global consumption. 

"J.P. Morgan" predicts that the average Brent price in 2027 will fall to $64 per barrel, attributing this to weaker-than-expected demand and warning of a surplus that will begin to form starting in the fourth quarter of this year, which may compel producers, such as the "OPEC+" alliance, to cut production at the beginning of 2027.

Meanwhile, "Citi Group" stands in the more pessimistic camp; its analysts recommended selling during any rises in oil prices over the summer, expecting Brent crude to reach a range of $60 to $65 per barrel by the end of the year as the risk premium associated with the crisis diminishes.

Global Supply Surplus Approaching 5 Million Barrels per Day

In the middle stands "Morgan Stanley", which, in a memo late last month, made its second reduction in predictions within two weeks, revising Brent's price down to $75 in the fourth quarter, down from an earlier forecast of $80, and maintaining a prediction of $75 for the first half of 2027 and $70 for the second half, with a global supply surplus reaching up to 4.8 million barrels per day.

For its part, "Goldman Sachs" expects an average Brent price of $75 in 2027, despite a surplus exceeding 3 million barrels per day; a third of which will be absorbed by the process of rebuilding the depleted strategic reserves.

Brent crude was trading above $72 per barrel last week, after declining from levels exceeding $100 per barrel during the crisis, with fears about supplies diminishing and shipping traffic resuming through the Strait of Hormuz.