Jefferies Raises Oil Price Forecasts Amid Supply Risks
Jefferies has increased its long-term oil price outlook, arguing that current market pricing does not fully reflect tightening supply conditions and rising geopolitical risks affecting global energy infrastructure.
Higher WTI and Brent Price Targets
The firm raised its long-term forecasts for West Texas Intermediate and Brent crude by $5 per barrel, setting new targets at $70 and $75, respectively.
In addition, Jefferies lifted its 2026 WTI estimate to $81.79 per barrel and set its 2027 forecast at $75, signaling a more bullish long-term outlook for oil prices.
Oil Futures Curve Seen as Mispriced
According to Jefferies analysts, the current oil futures curve is misaligned at both ends. In the near term, approximately 10–12 million barrels per day of oil supply—including crude, condensates, and refined products—remains effectively offline due to an ongoing global energy crisis.
At the same time, factors such as floating storage tied to sanctions and the release of roughly 400 million barrels from strategic reserves have temporarily suppressed front-month prices, masking underlying supply tightness.
Supply Tightness Expected to Push Prices Higher
The analysts believe that as these temporary buffers diminish, front-month oil prices will need to rise in order to reduce demand and rebalance the market.
On the longer end of the curve, Jefferies argues that current pricing is too low to incentivize sufficient supply growth, particularly as producers adopt a more disciplined, returns-focused strategy.
U.S. Shale Growth Remains Limited
U.S. shale producers, once known for rapid output increases, are now showing restraint. Even with WTI prices in the high-$60s to low-$70s range projected for 2027, companies are unlikely to significantly accelerate production.
Jefferies expects flat U.S. shale output growth in 2026 under normalized pricing conditions. Even at $85 WTI, projected growth of around 550,000 barrels per day may not be enough to meet demand or rebuild global inventories.
Rising Risks to Energy Infrastructure
The report also highlights a structural shift in risks facing global energy infrastructure. The increasing use of low-cost drone technology and advanced missile systems capable of bypassing defenses has significantly heightened vulnerability.
With nearly 20% of projected global liquefied natural gas (LNG) supply growth located near the Strait of Hormuz, geopolitical risks are becoming a key factor in long-term energy market dynamics.
Investment Strategy and Top Energy Picks
From an investment perspective, Jefferies recommends accumulating high-quality energy stocks during market pullbacks. The firm expects short-term price weakness but anticipates stronger pricing further along the oil curve.
Top stock picks mentioned include:
- Ovintiv
- ConocoPhillips
- EOG Resources
- Northern Oil and Gas
- Cenovus Energy
- SLB
- Baker Hughes
- Halliburton
