Oil and Gas

Oil Price Scenarios: Pricing in Disruptions

• We see ~8–11mb/d of oil supply at risk, with Brent potentially rising to US$105–135/ bbl under our disruption scenarios.
• SoH (~20% global flows) and the resulting tanker disruption amplify supply loss via higher freight and rerouting delays
• Despite emerging flows into SoH, we continue to see Moderate disruption as our base case and retain tactical (3M) OW.

Oil Price Scenarios

Over the past 30 days, the Middle East conflict has rapidly evolved into a realized physical supply disruption, with global oil supply losses now estimated at ~8–11mbpd (~9-11% of global demand). Recent vessel tracking data from Hormuztracker suggest that tanker traffic through the Strait of Hormuz remains severely disrupted. While flows have begun to partially resume, the scale of recovery remains limited, leaving ~9-10% of global tanker fleet still delayed or stranded. We frame our price scenarios based on the duration of a potential Strait of Hormuz disruption and resulting net supply loss. Under our three scenarios, Brent could rise to US$80-90/bbl in mild disruption, US$105-115/bbl in a sustained scenario, and up to US$110-135/bbl in prolonged disruption. However, we emphasize that demand destruction and supply response mechanisms could cap the duration of elevated prices.

SoH Reopening Remains a Critical Factor

The Strait of Hormuz represents the most critical oil chokepoint globally, handling ~20% of global oil supply (~17–20mb/d) and a significant share of LNG exports. Even partial disruption, through tanker attacks, higher war-risk premiums, or shipping constraints can reduce effective supply beyond physical production losses. Tanker rerouting could extend shipping time by ~10–15 days (via Cape of Good Hope), while freight and insurance costs could rise by >2–3x, tightening prompt availability of crude and refined products. As a result, effective supply to Asia could decline disproportionately, amplifying price volatility.

Indonesia’s Vulnerability Lies in Volume

From a regional perspective, ASEAN remains highly exposed to oil supply shocks, particularly as 25-48% of the region’s import flow through the Strait of Hormuz. While Indonesia appears less dependent on Middle East imports on a direct basis, indirect exposure via Singapore raises its effective reliance to ~32%, broadly in line with the Philippines but below Thailand and Vietnam at ~60%+. However, Indonesia faces one of the largest risks in absolute terms, with ~324 kbpd of imports at risk, second only to Singapore.

Maintaining Positive Tactical view in Upstream and Coal

Despite recent development pointing toward rising flows into SoH, we continue to see Moderate disruption as our base case. At the sector level, we assign a tactical (3M) OW view on upstream oil & gas, with MEDC as our top pick given its production growth (165–170 Mbpd in FY26F; ~5.7-8.9% y-y) and strong earnings leverage to oil prices. We also like the coal names as the preferred beneficiaries of a prolonged energy shock.

… Read More 20260407 Oil and Gas