Oil Price Falls Below $98 as BofA Keeps $80 Forecast and Warns of Renewed Supply Shock

BofA forecasts cheaper oil in 2027 if disrupted supplies recover, but depleted inventories leave Brent vulnerable to a much sharper rise if fighting resumes.

Brent crude oil prices fell to $97.44 a barrel at 16:50 GMT on Friday, down 1.78% from Thursday’s close and almost $7 below their pre-election level on Tuesday.

WTI traded at $90.56, down 0.89%, as both benchmarks gave back part of Thursday’s recovery.

BofA’s latest energy outlook retains a $80 Brent average for 2027 and $74 for WTI, but warns that another major Middle Eastern supply disruption could push Brent towards $150 next year.

The higher figure is a conditional war scenario, not the bank’s central forecast.

Published on 5 November, the report already considers the Democratic midterm gains and asks whether they increase the prospect of an Iran agreement.

The lower-price forecast depends on the restoration of production, shipping and refining capacity, with less oil in storage available to cover another interruption.

A lower annual average requires a supply recovery

BofA’s commodity strategists write:

“A ceasefire in the US-Iran, Saudi-Houthi, and/or Russia-Ukraine conflicts could unlock constrained energy production, normalize trade routes and refinery utilization, and rapidly move the global oil and gas markets back toward surplus, eventually pushing Brent toward $80/bbl or even lower on average next year.”

The forecast is for the average price across 2027, rather than a target that Brent must reach on a particular date.

BofA’s quarterly path starts at an $89 average in the first quarter and falls to $74 in the fourth.

That distinguishes its call from Berenberg’s recently published $75 end-2027 forecast, even though both depend on improved access to supplies.

Friday’s lower price does not establish that this recovery has happened.

CBS reported on Friday that Iranian claims of tanker mine strikes remained unconfirmed by maritime officials.

BofA also allows for an outcome between peace and renewed war:

“Yet a continuation of today’s fragile status quo into 2027, characterized by intermittent attacks, constrained Iranian supply and elevated shipping risks, remains very much a possibility. We believe a “neither war nor peace” scenario would keep the physical market structurally tight and could support Brent prices around triple digits.”

The inventory cushion has become smaller

The bank’s concern is that the same size of supply loss can become more expensive once reserves have been drawn down.

Its report explains how the initial disruption was absorbed:

“The market entered the conflict unusually well supplied following several quarters of surplus, allowing inventories to absorb much of the initial disruption. But that cushion is being rapidly depleted, with particularly large stock draws in China and declining strategic inventories across OECD economies.”

Drawing on stored oil lets consumption continue while production is interrupted, but leaves fewer barrels available if deliveries are disrupted again.

The US Energy Information Administration’s latest monthly assessment, published in October, estimated that global inventories fell by 1.9 million barrels a day in the third quarter and projected further withdrawals in the fourth.

Its next outlook is due on 10 November, providing a fresh test of how quickly the physical shortage is easing.

The bank’s most bullish scenario combines reduced reserves with limited scope to increase production or curb consumption quickly:

“The most bullish scenario remains a renewed US-Iran kinetic conflict: global oil inventories are now lower, US shale appears less responsive to price than in previous cycles, and short-run oil-demand elasticity remains limited. Under those conditions, another major Middle Eastern disruption could require substantially higher prices to clear the market, potentially pushing Brent towards $150/bbl in 2027.”

More crude does not immediately mean cheaper fuel

Lower crude prices may also take time to reach fuel users.

BofA estimates that crude exports through Hormuz recovered to about 7.4 million barrels a day in September, but finds a weaker recovery in refined fuels.

It writes: “This distinction matters because refinery outages, rather than crude availability alone, have become a central constraint on usable energy supply.”

Damage to refineries in Russia and the Middle East can therefore keep diesel and other fuels expensive even when more crude reaches the market.

UniCredit’s separate November outlook makes a similar distinction between a rapid fall in the geopolitical premium and a slower operational recovery:

“A credible ceasefire, meaningful diplomatic progress and improved shipping security could allow part of that premium to unwind relatively quickly. However, a full return to pre-war conditions, shipping patterns and inventory levels is likely to take longer than previously anticipated.”

What this means for Brent and WTI

For BofA’s lower-price forecasts to hold, diplomatic progress must deliver sustained supplies that allow inventories to rebuild.

The practical signs would include steadier Gulf exports, recovering refinery operations and fewer costly shipping diversions.

A ceasefire headline could reduce the premium investors pay for disruption risk before those improvements arrive, leaving prices vulnerable if the agreement fails to secure deliveries.

With less stored oil available, another interruption would meet a market less able to absorb it than at the start of the conflict.