Oil supply risks could keep Brent near US$100 by year-end

KUALA LUMPUR: Brent crude is anticipated to stay high throughout the final quarter of 2026 due to increasing global supply constraints and heightened threats to oil transportation through critical Middle Eastern bottlenecks, according to Hong Leong Investment Bank Bhd (HLIB). HLIB has increased its 2026 price projection for Brent to US$90 per barrel, up from a previous estimate of US$80.

The bank maintains an Overweight rating for the oil and gas industry, with Dialog Group Bhd as its top recommendation, targeting RM2.49 per share. The surge past the US$100 mark for Brent on September 10 was fueled by escalating Middle East tensions raising worries about disruptions at the Strait of Hormuz and Bab el-Mandeb. The East-West Pipeline, a crucial backup route bypassing the Strait of Hormuz, has been temporarily out of service following drone attacks, reducing its 7 million bpd capacity to 5 million bpd for exports and 2 million bpd for domestic refineries.

This has raised concerns about alternative crude export paths, with Yanbu exports dipping to a six-month low of 1.43 million bpd from 3.9 million bpd a few months earlier. Furthermore, traffic through the Strait of Hormuz has plummeted to less than 10% of pre-war levels since July to September 2026. HLIB also notes a potential recovery in China's crude imports, with imports up 22% month-over-month in July and an additional 6% in August to 37.9 million tonnes, despite the Strait of Hormuz disruption and reduced domestic oil demand.