Oil Shock: Kotak Hikes FY27 Crude Forecast to $100
Kotak Institutional Equities hikes FY27 crude oil price forecast to $100 per barrel citing prolonged supply disruptions in West Asia.
In a significant move reflecting the volatility of global energy markets, Kotak Institutional Equities has raised its crude oil price assumption for the financial year 2027 (FY27). The brokerage now expects prices to hit USD 100 per barrel, up from its previous estimate of USD 90 per barrel. This revision comes as a direct result of prolonged supply disruptions triggered by the ongoing conflict in West Asia.
The West Asia Conflict and Supply Chaos
The brokerage highlighted that the conflict in West Asia has persisted for eight months, creating one of the most substantial oil supply disruptions seen in recent history. With limited visibility on when stability will return to the region, the near-term outlook for energy prices has become increasingly strained.
Recent escalations, including attacks on Saudi infrastructure and oil tankers navigating the Strait of Hormuz, have pushed crude oil prices to six-month highs. These tensions have not only impacted the raw product but have also sent freight rates for product and crude oil tankers to multi-year highs.
Price Trends and Current Market Data
According to the report, the market has seen a sharp climb. Brent crude has averaged nearly USD 104 per barrel so far in FY27, and was trading at USD 128 per barrel at the time of the assessment. Furthermore, Dated Brent averaged USD 126 per barrel in October, maintaining the higher trajectory.
Key Price Forecasts:
- FY2027: Revised to USD 100 per barrel (from USD 90).
- FY2028: Retained at USD 75 per barrel.
- Long Term: Retained at USD 75 per barrel.
Looking Ahead: Will Prices Soften?
Despite the current spike, Kotak Institutional Equities remains optimistic that prices will ease in the second half of FY27. This optimism is contingent on two main conditions: that hostilities in West Asia do not intensify further and that supply flows continue to normalize.
The report notes that while renewed attacks have increased uncertainty, oil flows through the Strait of Hormuz have already shown significant recovery. The brokerage believes that global oil markets have remained largely well-managed and resilient despite the scale of the disruption.
"While we remain optimistic about normalization and softer oil prices, this higher price trajectory leads us to raise our FY2027 assumption to USD 100/bbl from USD 90/bbl," the brokerage stated.
The revised forecast acknowledges the immediate pressure of geopolitical instability while maintaining a long-term view that supply conditions will eventually stabilize, returning prices to a more sustainable level by FY28.