HSBC Raises 2026 Oil Forecast by $10 as Diesel Crunch Worsens and Refining Capacity Falls Short
Product market pressure is driving bullish revisions, with global refining capacity down 10 percent and fuel inventories depleted by earlier drawdowns.
ICE Brent crude front-month traded at $99.84 a barrel on Tuesday (2026-09-22), down 0.50 percent, while refined product markets signalled a tighter picture. US heating oil futures and domestic diesel prices both sat at $4.92 a gallon, underpinned by a refining capacity shortfall that industry officials said had no near-term fix. HSBC raised its 2026 oil price forecast by $10 a barrel in a note on Tuesday (2026-09-08), citing persistent supply disruptions driving a tighter-than-expected outlook through 2027.7,6
Only 1 million barrels per day of the estimated 10 million bpd of outbound flows through the Strait of Hormuz are refined products, according to industry data, meaning the waterway's partial reopening has done little for fuel markets. Bloomberg reported in the week of July 27 (2026-07-27) that wars in the Middle East and Ukraine, China's caps on fuel exports and Russia's ban on diesel exports had collectively reduced global refining capacity by as much as 10 percent. Industry officials who gathered in early September (2026-09-09) warned the diesel crunch was set to worsen and push inflation higher across goods markets.6
Shell, Exxon and Chevron all warned that pump prices would stay elevated regardless of how the conflict evolves, with their concern anchored in the state of physical inventories. IEA-tracked data showed observed global inventories, including oil on water, drew down 250 million barrels over March and April, equivalent to 4 million barrels per day. By end of May (2026-05-31), more than 1.1 billion barrels of crude had not reached the market, Energy Voice reported.5,2,3
J.P. Morgan's Head of Global Commodities Strategy Natasha Kaneva took a more measured view. In a report sent to Rigzone in the week of July 20 (2026-07-20), Kaneva described Brent as "propelled" nearly 40 percent higher in July, but said "price action is telling a more nuanced story." At around $100, Brent was trading just $13 above J.P. Morgan's estimated fair value of $87 a barrel for July. The bank wrote that the market had "rebalanced in a way that has kept prices relatively subdued" relative to the underlying supply loss.4
That rebalancing came primarily through demand destruction. Demand fell by roughly 5.1 million barrels per day, offsetting nearly 46 percent of the supply loss, while inventory releases contributed 3.6 million barrels per day, J.P. Morgan calculated. Production had been running between 5 and 14 million barrels per day below pre-conflict levels since February 28 (2026-02-28), rebounding sharply in June but still 9.4 million bpd below pre-war volumes at that point, according to analyst Varga quoted by Energy Voice.4,3
The alternative routing that replaced some disrupted flows carries its own vulnerabilities. J.P. Morgan flagged nearly 7.0 million barrels per day of pipeline rerouting as "increasingly vulnerable to severe disruptions" following reports that Houthi forces had begun enforcing a Red Sea blockade. About 240 tankers remain idled outside the Strait of Hormuz, against pre-war traffic of roughly 130 to 140 transits per day.4,2
HSBC identified Saudi and UAE bypass pipelines, together with projects under construction, as an increasingly important part of the supply adjustment. Under its recovery scenario, if a durable ceasefire is reached in the fourth quarter of 2026, HSBC said Gulf exports could rise to near pre-conflict levels and the market could return to balance by year end.7
A Bloomberg Intelligence survey from May (2026-05-21) showed most market participants expecting Brent to average between $81 and $100 a barrel over the next 12 months, with the majority projecting supply disruptions of 3 to 7 million barrels per day. The US EIA projects US crude output reaching a record 14.1 million barrels per day in 2027. Higher domestic US production would add eventual supply-side weight, but it does nothing to close a diesel shortage driven by refining capacity constraints rather than crude scarcity.1
The 0.50 percent slip in ICE Brent front-month on September 22 (2026-09-22) partly reflects some market pricing of a ceasefire outcome. But with only 1 million of every 10 million barrels leaving Hormuz as a refined product, heating oil and diesel prices respond to a different set of variables. How quickly Saudi-UAE bypass capacity comes online, and whether Houthi enforcement of the Red Sea corridor proves durable through winter, may be more consequential for product prices than whatever crude does next.6,4,7