UBS Cuts Oil Forecasts as Doha Talks Progress; DXY Holds Steady

UBS Downgrades Oil Outlook Amid Geopolitical De-Escalation

Thin trading volumes ahead of the US Independence Day holiday saw oil markets consolidate within narrow ranges, as attention shifted from supply disruptions to the pace of crude returning to global markets. The reopening of the Strait of Hormuz and progress in US-Iran talks in Doha underpinned a modest short-covering rally, with Brent crude settling near $71.80 a barrel (+0.32%) and WTI at $68.69 (+0.16%). Both benchmarks, however, remained near their lowest levels since February.

Switzerland-based UBS revised its Brent price forecasts sharply lower, cutting the Q3 estimate by $25 to approximately $80, trimming the Q4 view by $10 to $80, and reducing the 2027 outlook by $10 to $75. The revisions reflect growing expectations of a near-term surplus as Middle Eastern supply normalizes.

Supply Recovery Offsets Geopolitical Risks

At least five supertankers carrying around 10 million barrels of Saudi crude have cleared the Strait of Hormuz, with Aramco switching to spot pricing to expedite Asian deliveries. Mediator Qatar confirmed that US and Iranian negotiators made "positive progress" in Doha discussions aimed at securing a lasting peace agreement, with further talks scheduled for mid-July. The de-escalation reduced fears of prolonged shipping disruptions, prompting traders to reassess supply-demand balances.

HSBC analysts noted that while the market faces near-term oversupply pressures, strategic petroleum reserve releases and tepid Chinese demand could gradually ease. US crude inventories dropped to their lowest since 2018, though gasoline stocks also declined, signaling resilient refining activity.

Broader Market Implications

Nigeria became the first OPEC member to join the International Energy Agency as an associate, strengthening ties between the energy watchdog and Africa's largest oil producer. Meanwhile, Ukrainian forces struck a Lukoil refinery in Russia's Nizhny Novgorod region, highlighting ongoing energy infrastructure risks.

For Forex traders, the dovish reaction to advance US non-farm payrolls data suggests the dollar may face headwinds if labor market softness persists. The DXY index could remain range-bound amid mixed signals from oil markets and central bank policy expectations. Risk sentiment remains cautious, with equity markets likely to track energy sector volatility and geopolitical headlines.

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