UBS slashes oil forecasts as Hormuz flows recover

Oil prices fell for a third consecutive day on Thursday as easing supply fears, record U.S. production, and recovering Strait of Hormuz flows combined to push Brent crude below $71 a barrel — levels not seen since before the U.S.-Israel war on Iran began in late February. The decline follows confirmation from Qatar's Foreign Ministry that indirect U.S.-Iran talks in Doha produced "positive progress" on issues tied to the memorandum of understanding that halted fighting on June 17.reuters+1

Doha Talks and Hormuz Recovery

Iran and the United States concluded two days of indirect technical talks in Doha on Wednesday, with Qatari and Pakistani mediators shuttling between the two sides. The discussions focused on maritime traffic through the Strait of Hormuz and the unfreezing of Iranian assets, according to sources familiar with the negotiations cited by Reuters. Vice President JD Vance said the meetings were "going well" and indicated nuclear discussions would begin shortly.cnn+1

Commercial shipping through the strait has surged since the interim agreement, with oil flows climbing above 10 million barrels per day with U.S. naval support, according to a U.S. official cited by Bloomberg. That remains well below the roughly 20 million barrels per day that transited before the war, but represents a dramatic recovery from the near-total paralysis during the conflict.bloomberg+1

Supply Glut Looms

UBS ↗ 2.65% on Thursday slashed its Brent crude forecasts, cutting its third and fourth quarter 2026 outlook to $80 per barrel — down from $105 and $95 respectively — and lowering its 2027 forecast by $10 to $75. "From here, we see Brent trading in a $70–100/bbl range, with the path largely determined by the pace of Hormuz normalisation and durability of the US-Iran MoU," UBS analysts wrote.reuters+1

Adding to downward pressure, the U.S. Energy Information Administration reported Tuesday that domestic crude production rose to a record 13.93 million barrels per day in April, as producers ramped up output in response to wartime prices. Meanwhile, seven OPEC+ nations are set to meet on July 5 to review quotas, with expectations of another output increase after the group approved four consecutive monthly hikes totaling nearly 800,000 barrels per day since April.miningweekly+2

From War Premium to Surplus Fears

The speed of the reversal has been striking. Brent surged above $120 during the height of the Hormuz closure and dropped roughly 21% in June alone — its largest monthly decline since March 2020, according to CNBC. With Iranian exports resuming at scale — Tehran claims more than 40 million barrels shipped since the blockade lifted — and U.S. production at all-time highs, the market's focus has shifted decisively from scarcity to surplus.cnbc+1