Swiss Bank UBS (UBS) Sees $150 Crude Oil in ‘Worst-Case Scenario’

Swiss bank UBS Group is warning that crude oil prices could top $150 per barrel in coming months in a “worst-case scenario” for energy markets.

In a note to clients issued on May 21, UBS raised its crude oil price forecast by $10 per barrel as disruptions persist in the Middle East. Commodities analysts at UBS project that Brent crude oil, the international standard, will trade at $105 U.S. per barrel and West Texas Intermediate (WTI) crude, the U.S. benchmark, will be at $97 by year’s end.

UBS says that risks remain skewed to the upside as the Strait of Hormuz near Iran, where 20% of the world’s oil is shipped, remains effectively shut to commercial shipping traffic. The bank added that if the current supply disruptions continue, prices could overshoot in the short term and trade above $150 per barrel.

Get Ready for Oil Hoarding

UBS also says that growing scarcity fears around the world could lead to the hoarding of crude oil among countries, further driving up prices. UBS says that oil production losses likely reached 650 million barrels in March and April of this year.

Crude oil prices have been steadily rising after the U.S. and Israel attacked Iran. Crude oil production losses are on track to exceed one billion barrels by the end of May this year, adds UBS in its note. Brent crude oil is currently trading right around $110 per barrel.

The rise in oil prices has lifted the stocks of oil majors such as Chevron (CVX), Occidental Petroleum (OXY), and Shell (SHEL).

Comparing Oil Stocks

Below is a chart comparing the stocks of Chevron, Shell and Occidental Petroleum. As one can see, all three stocks carry Buy ratings, although Chevron is the only one with a Strong Buy recommendation. Analysts continue to see upside in all three oil stocks.