Bernstein Energy & Power: Who will blink first? Four things to watch for oil markets

The business of forecasting oil price next year is harder than usual. Normally we would be dusting off our supply demand balances, inventory updates and marginal cost analysis, but next year will be about geopolitics and specifically how the US-Iran war plays out. The forward curve, which is highly backwardated, implies that oil price will be broadly similar to this year. Year to date Brent has averaged US$90/bbl; if spot remains at current levels through year-end, Brent will average US$94/bbl, a little higher than our forecast of US$90/bbl, and the forward curve currently indicates US$94/bbl for 2027. We see four key things to watch in the coming months. Firstly, the extent to which the US can keep oil flowing to global markets from the Middle East: 669 vessels crossed the Strait in September, the highest since the conflict began, but since early October flows have fallen back to 80% of pre-war levels while attacks on shipping have risen to more than one per day, raising the estimated