Piper Sandler has raised its forecast for Brent crude in the second half of 2026 by $10 per barrel, to $90/b, citing two primary forces tightening the world oil market: an entrenched supply stalemate in the Middle East and deep reductions in Russian refining capacity. The firm said these developments have narrowed global crude availability more than its July projections anticipated.
The research note framed the revision as "mostly a mark-to-market exercise," noting that Brent averaged $88/b through Q3 under the firm’s data - already well above the $80/b midpoint the firm had used in mid-July. That earlier estimate was set when a memorandum of understanding was in place and Strait of Hormuz shipping activity was running from a higher baseline. According to Piper Sandler, the geopolitical backdrop has deteriorated materially since then.
"Not only has Mideast supply been more constrained, but there's been zero diplomatic or military movement toward ending the conflict. The term Stalemate applies," the firm wrote, stressing the persistence of supply-side constraints rather than temporary disruptions.
Another factor supporting higher prices, Piper Sandler said, is "drastic cuts to refining capacity in Russia," which the firm argues removes a key outlet for crude that would otherwise help alleviate upward pressure on global benchmarks. With fewer Russian refining barrels available, crude that might once have been processed there must find alternative markets or remain unconsumed, tightening balances and supporting prices.
Perhaps the most notable passage in the report is the firm’s candid recognition of upside risk to its own raised target. Piper Sandler warned that "we fear that $90/b for Q4 may prove an under-estimate," an explicit admission that even the updated call could still be conservative. Given the Q3 average of $88/b recorded in their data, the margin to a $90/b Q4 estimate is narrow; the firm noted that any additional supply disruption in the Strait of Hormuz or further Ukrainian strikes on Russian refining infrastructure could push the benchmark above the bank’s ceiling.
Implications for energy companies
The adjustment carries immediate relevance for integrated oil majors and pure-play exploration and production (E&P) firms within the S&P 500 energy cohort. Piper Sandler observed that sustained, higher Brent prices translate relatively directly into stronger cash generation and increased capacity for shareholder returns for companies that are exposed to the benchmark. That linkage underscores how macro supply dynamics feed through to corporate free cash flow and capital allocation decisions in the sector.
U.S. natural gas view: quieter than the street
On natural gas, Piper Sandler expressed a much more restrained outlook, explicitly sitting below consensus. The firm highlighted that gas inventories stayed about 150 billion cubic feet above five-year norms throughout the injection season, and that prices averaged below $3/MMBtu in both Q2 and Q3 based on its reporting.
Piper Sandler attributes the relatively balanced U.S. gas picture to steady production gains of roughly 4-5% annually, which the firm says have kept U.S. natural gas "in easy equilibrium." The research team reiterated its below-consensus forecasts for Q4 and added quarterly detail to its 2027 outlook, while noting that specific quarterly figures for 2027 were not disclosed in the publicly available material.
The firm framed its gas position as structural rather than cyclical: "US producers can comfortably grow production and infrastructure to meet strong domestic power-demand and LNG export scenarios at $3+ MMBtu." In practical terms, that argument implies that producers who can earn acceptable returns at or above $3/MMBtu have less incentive to restrict output. Piper Sandler pointed to that dynamic as the principal reason it sits below the Street on gas forecasts.
What this means for market participants
- Energy equity investors should consider the potential for higher cash flows at integrated majors and E&Ps if Brent remains around or above the new target.
- Participants in U.S. gas-weighted E&Ps and LNG infrastructure securities may want to weigh the firm’s structural argument that supply can expand without a substantial price spike, which could limit upside in gas prices relative to market consensus.
- Traders monitoring geopolitical developments in the Strait of Hormuz and the security of Russian refining assets may find these areas central to assessing near-term upside risk to Brent beyond the firm’s $90/b call.
Piper Sandler’s report offers an explicit, data-driven articulation of current upside and downside pressures: tighter oil balances driven by geopolitics and refining outages overseas on one hand, and a U.S. gas market sustained in balance by steady production growth on the other.