Piper Sandler increased its Brent crude forecast for the second half of 2026 to $90 per barrel from $80 per barrel, pointing to constrained Middle East supplies and reductions in Russian refining capacity.
The firm said the oil market has tightened more than anticipated when its previous forecast was established in mid-July.
Piper Sandler characterised the $10-per-barrel increase as “mostly a mark-to-market exercise,” as Brent averaged $88/b through the third quarter. Its earlier forecast had a midpoint of $80/b, set when a memorandum of understanding existed and Strait of Hormuz traffic was operating at a higher baseline.
“Not only has Mideast supply been more constrained, but there’s been zero diplomatic or military movement toward ending the conflict. The term Stalemate applies,” the firm wrote.
Piper Sandler also pointed to lower Russian refining capacity as contributing to its revised oil outlook.
“Drastic cuts to refining capacity in Russia add price support,” the firm said.
The new forecast does not rule out Brent exceeding Piper Sandler’s estimate during the fourth quarter.
“We fear that $90/b for Q4 may prove an under-estimate,” Piper Sandler wrote.
The firm’s data showed Brent averaging $88/b during the third quarter, compared with its $90/b fourth-quarter projection.
U.S. natural gas outlook remains below consensus
Piper Sandler maintained its below-consensus position on U.S. natural gas, citing inventory levels and continued production growth.
Natural gas inventories held a surplus of approximately 150 billion cubic feet compared with five-year averages throughout the injection season, according to the firm. Prices averaged below $3/MMBtu in both the second and third quarters.
Piper Sandler said annual U.S. natural gas production growth of 4% to 5% has maintained what it described as “in easy equilibrium” between supply and demand.
The firm reiterated below-consensus fourth-quarter forecasts and introduced quarterly detail to its 2027 projections. Specific quarterly estimates were not disclosed in the available report.
Piper Sandler’s outlook assumes producers can increase output and supporting infrastructure to accommodate additional domestic electricity consumption and LNG exports at prices above $3/MMBtu.
“US producers can comfortably grow production and infrastructure to meet strong domestic power-demand and LNG export scenarios at $3+ MMBtu,” Piper Sandler wrote.
Under the firm’s assessment, increased electricity demand and expanding LNG export capacity can be supplied without requiring a substantial increase in U.S. natural gas prices.
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