Global energy consultancy Wood Mackenzie (WoodMac) now expects the price of Brent crude oil to average $78/bl in 2027 and potentially ease to $70/bl by the fourth quarter of 2027.

This forecast follows on the back of the memorandum of understanding (MoU) agreed to between the US and Iran in recent days, paving the way for shipping to resume through the Strait of Hormuz.

WoodMac notes that Brent crude oil averaged $92/bl over the first half of this year, supported by elevated prices from March to May, and investor sentiment has since moved swiftly and favourably.

In the four weeks to June 16, positioning for higher Brent prices fell by about 80% from a five-year high, and WoodMac’s vessel tracking data has revealed that ships of all categories transiting the Strait of Hormuz reached a peak of 35 on June 18, up from the low teens each day but still well short of pre-war levels.

The consultancy notes that the revised forecast of $78/bl in 2027, and a potential $70/bl by the fourth quarter of 2027, assume that transit flows through the strait would normalise throughout August.

Alternating periods of elevated and depressed prices are likely as demand recovery, inventory rebuilding and production ramp-up remain misaligned.

“Recovery will take months. The supply shock removed more than 11-million barrels each day of crude from global markets. WoodMac projects 70% of shut-in volumes could return within three months of the Strait reopening and 90% within six months,” the report highlights.

On refining margins, WoodMac notes that jet crack spreads remain at almost double pre-war levels despite easing progressively over the past two years.

“Jet crack spreads running at almost double pre-war levels are the clearest signal that this market has not yet normalised. Getting the barrels back is a different challenge from reaching a deal,” says WoodMac Macro Oils senior VP Alan Gelder.

Meanwhile, the consultancy says, ahead of the breakthrough in talks in recent days, the pressure for the US and Iran to reach an agreement on the reopening of the strait was acute.

It pointed out that, on June 15, US President Donald Trump had acknowledged that US reserves would run out “in about four weeks” as inventories at the Cushing hub, in Oklahoma, had drastically plummeted. This factor, the consultancy argues, brought both sides to the negotiating table.

“A prolonged closure would have pushed Brent well above $150/bl. The MoU changed that trajectory. But the full value chain, from wellhead through to Gulf Cooperation Council ports, will take the better part of a year to fully recover,” Gelder concludes.