Brent: Slower normalisation lifts forecasts – Societe Generale

Societe Generale strategists highlight that Brent futures have swung sharply with conflict headlines, recently rebounding to $95/bbl. They stress that physical balances remain tight, Strait of Hormuz logistics are severely constrained, and historical precedents suggest supply normalisation will be slow, prompting an upward revision to their end‑2026 Brent price forecast toward $85/bbl.

Brent repricing on protracted Gulf disruption

“For the current US–Iran conflict, we estimate that OPEC supply fell by roughly 42% in March, with a similar decline expected in April. Our base case assumes production begins to recover in May but does not fully normalise for around nine months. This trajectory aligns closely with historical experience: across the five most significant Middle East energy crises since 1956, supply normalisation has taken close to eight months on average.”

“Against this backdrop, we stand ready to revise our end‑2026 Brent price forecast. Our base assumption is shifting toward a slower normalisation of Persian Gulf flows by mid‑May, rather than the earlier expectation of improvement by late April. This change alone lifts our end‑year Brent forecast from $79/bbl to $85/bbl.”

“Even so, this revised level may still underestimate both the difficulty and duration of normalisation, particularly given the scale of shut‑ins and the constraints around shipping, insurance, port damage, and debris clearance.”

“Consistent with both logistics and historical precedent, our working assumption remains that full normalisation occurs only toward the end of 2026, despite the recent easing in headline prices.”

“Even under a best‑case scenario—assuming hostilities end by late April—global inventories are unlikely to begin a sustained path toward normalisation until late May at the earliest, and potentially later.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)