• Fitch retains 2026 Brent forecast at $87/bbl but warns risks are skewed to the downside.
  • Oil market expected to return to oversupply from September, with Brent falling toward $70/bbl by Q4 2026.
  • Temporary Hormuz disruptions offset by strong non-OPEC supply and comfortable inventories.

Fragile Prospects

Fitch Ratings is cautioning that oil price risks are now tilted to the downside, even as it keeps its 2026 Brent forecast unchanged at $87 per barrel. The ratings agency sees the market swinging back into oversupply starting in September, a shift that could pressure prices later in the year.

According to a report released Thursday, Fitch expects Brent to slide to around $70 per barrel by the fourth quarter of 2026, as supply increases and demand remains soft. The firm points to comfortable global inventories, robust non-OPEC supply, and a quick recovery in Middle East output once hostilities ease as key bearish factors.

"The market is set to return to surplus from September," Fitch analysts wrote, noting that June shipments through the Strait of Hormuz added enough supply to offset two extra months of disruption. The agency assumes the strait will reopen by end-July, allowing for a rebound in regional production.

The Bearish Case

Fitch highlights that OPEC's spare capacity of about 3.6 million barrels per day provides ample buffer to offset any losses, further supporting the view that price spikes will be short-lived. The firm's prognosis aligns with a broader market consensus that geopolitical premiums are fading as physical supply proves resilient.

"We see the market pivoting from a tight balance to a glut," said the report, emphasizing that current price levels above $80 are unlikely to persist into the fourth quarter. This outlook suggests that energy investors should brace for a potential drop of nearly 20% from current levels by year-end.

The warning comes as traders weigh mixed signals, including ongoing tensions in the Middle East and robust U.S. shale output. Fitch's analysis, however, suggests that the bearish forces will dominate as the year progresses.

Market Implications

For oil producers, the forecast underscores the need to hedge against a weaker price environment. For consumers, it hints at potential relief at the pump later in 2026. Meanwhile, analysts will be watching inventory data and OPEC's production decisions for confirmation of the expected shift.

Fitch's outlook remains contingent on several variables, including the pace of Middle East recovery and global demand trends. The agency did not adjust its 2026 average forecast, but the downward risk to prices is now a central theme in its assessment.

While the market has rallied in recent weeks on supply concerns, Fitch's report serves as a reminder that the underlying fundamentals are pointing toward a softer pricing landscape ahead. As always, the situation remains fluid, and unexpected disruptions could alter the trajectory.

Update: Fitch's report was released earlier today; Brent futures were trading around $83 per barrel at press time, reflecting a slight uptick on ongoing geopolitical worries.