By Siti Radziah Hamzah
KUALA LUMPUR, Oct 29 (Bernama) -- Brent crude oil prices are expected to average between US$80 per barrel and US$95 per barrel in 2027, assuming a progressive restoration of West Asian oil exports and a recovery in global supply that outpaces demand growth, analysts said.
The projection aligns with the government’s estimate of an elevated average of US$85 per barrel under Budget 2027, which is unchanged from 2026.
SPI Asset Management managing partner Stephen Innes projects Brent to average around US$85 per barrel-US$95 per barrel in 2027 and expects a fairly wide trading range along the way.
“The market is still carrying a substantial geopolitical risk premium, even as West Asian Eastern crude exports recover.
“Tankers are moving, but the cost of moving those barrels remains exceptionally high, with freight and insurance costs reflecting a region that is still far from normal,” he told Bernama.
Innes added that at the projected average price, Malaysia should continue to receive meaningful support from petroleum revenue, but that would not automatically constitute a fiscal windfall.
He noted that stronger Brent prices support petroleum-related revenue and upstream earnings, which obviously helps the government’s fiscal position.
However, higher refined-product costs, particularly diesel, could quickly erode those benefits through fuel subsidies and rising transportation costs, said Innes.
"The government has already budgeted RM40 billion for fuel subsidies in 2027, which tells you how significant the energy burden has become.
“What concerns me is the possibility that Brent begins moderating while diesel remains exceptionally expensive. In that scenario, petroleum revenue could soften while the subsidy bill stays elevated,” he said.
Innes said this is a difficult combination when trying to narrow the fiscal deficit without squeezing household spending or broader economic growth.
He also expected that oil premium to gradually unwind through 2027, particularly if export flows remain stable and inventories rebuild, but he did not expect a straight line lower in prices.
Innes stressed that the real question was whether oil would shift from a supply problem to a demand problem.
“High energy costs are already weighing on global consumption, and if the broader investment cycle, particularly artificial intelligence (AI) capital expenditure, begins losing momentum, we could find ourselves looking at a much softer demand environment by the second half of next year,” he said.
He noted that the biggest upside risk remains another serious escalation in the West Asia conflict, particularly renewed attacks on production infrastructure or shipping.
Under that scenario, Innes did not rule out Brent moving back above US$110 per barrel-US$120 per barrel, especially given how depleted global inventories have become.
“But I think the downside deserves just as much attention. If geopolitical tensions ease, freight and insurance costs normalise, and West Asian production recovers faster than expected, Brent could quite easily move towards US$70 per barrel-US$75 per barrel, particularly if global demand continues weakening,” he added.
Innes said markets could be caught off guard if expectations prove misplaced, as attention remains on potential supply shocks while high energy prices already weigh on the global economy.
He said a possible slowdown in the AI capital expenditure boom could further weaken global energy demand.
“My concern is that by the second half of 2027, we may be talking less about geopolitical supply shortages and more about whether the world economy actually needs all the oil that is coming back onto the market,” he added.
Meanwhile, MARC Ratings Bhd chief economist Dr Ray Choy said Brent crude oil prices moderating towards an indicative average of US$80 per barrel-US$90 per barrel appears plausible in 2027, compared with MARC Ratings' 2026 forecast of US$90 per barrel-US$100 per barrel.
He noted that this assumed a progressive restoration of West Asian oil exports and a recovery in global supply that outpaces demand growth.
"Nevertheless, the persistence of geopolitical risk premiums, depleted inventories and elevated shipping costs suggests that price normalisation could remain uneven, particularly during the first half of 2027," he told Bernama.
Choy added that restoring oil flows through the Strait of Hormuz, which normally accounts for about a quarter of global seaborne oil trade, would materially ease physical supply constraints.
However, he noted that market conditions would not normalise immediately, particularly given depleted inventories, infrastructure damage, and persistently elevated freight and insurance costs.
“We therefore expect market tightness to ease progressively in 2027, although a complete return to pre-conflict conditions remains uncertain,” Choy said.
He added that the global oil market could move toward a more balanced position next year, with supply potentially increasing as production recovers.
Choy pointed out that the International Energy Agency projects physical supply to exceed demand, at 108.4 million barrels per day (mbpd) versus 104.4 mbpd, respectively.
“Nevertheless, these projections remain highly conditional on some normalisation of geopolitical stability and restoration of West Asian production.
“The pathway to a balanced position will therefore remain marked by uncertainty and oil price volatility,” he said.
Choy said it would be challenging for OPEC+ to coordinate effectively on production quotas due to external volatility amid the conflict, and much depends on the recovery of infrastructure damage.
-- BERNAMA
BERNAMA provides up-to-date authentic and comprehensive news and information which are disseminated via BERNAMA Wires; www.bernama.com; BERNAMA TV on Astro 502, unifi TV 631 and MYTV 121 channels and BERNAMA Radio on FM93.9 (Klang Valley), FM107.5 (Johor Bahru), FM107.9 (Kota Kinabalu) and FM100.9 (Kuching) frequencies.
Follow us on social media :
Facebook : @bernamaofficial, @bernamatv, @bernamaradio
Twitter : @bernama.com, @BernamaTV, @bernamaradio
Instagram : @bernamaofficial, @bernamatvofficial, @bernamaradioofficial
TikTok : @bernamaofficial
