UBS raises the average price of Brent crude oil to USD 72 this year, upgrading the target prices for PetroChina and CNOOC

UBS has raised its average price forecast for Brent crude oil in 2026 by $10 per barrel to $72, reflecting the current near closure of the Strait of Hormuz. The bank's basic assumption is that the conflict will last for several weeks, with transportation through the Strait of Hormuz remaining severely disrupted, while member countries of the Gulf Cooperation Council (GCC) will continue to be attacked, but key oil infrastructure will remain unaffected.

Additionally, the bank has raised its gas price forecasts for Europe and Asia by $2 to $12 and $13 per million British thermal units, respectively. Due to attacks on Qatar's liquefied natural gas facilities, TTF gas prices surged to nearly $20, reflecting market concerns over European gas supply. The bank expects visibility on the situation to improve in the coming weeks, but the risk premium will persist.

Based on the latest oil price forecasts, the bank has raised its earnings forecasts for PetroChina (00857.HK), CNOOC (00883.HK), and Sinopec (00386.HK) for 2026 by 13%, 16%, and 0.4%, respectively, to RMB 183.3 billion, RMB 148.1 billion, and RMB 52 billion.

At the same time, it raised the target price for PetroChina H shares by 10% to HKD 12.6, and increased the target price for PetroChina (601857.SH) A shares by 8% to RMB 15.1; the target price for CNOOC H shares was raised by 12% to HKD 33.6, and the target price for CNOOC (600938.SH) A shares was raised by 13% to RMB 47.5. The industry preference remains CNOOC H shares and PetroChina H shares.

Furthermore, the bank raised the target prices for CNOOC Services (02883.HK) and Jereh (002353.SZ) by 11% and 8%, respectively, to HKD 12 and RMB 140, both adjusting their mid-term return on invested capital forecasts higher, as higher oil prices may lead to a more optimistic outlook for upstream capital expenditure. The bank also raised the mid-term return on invested capital forecast for Baofeng Energy (600989.SH), as it can benefit from the widening oil-coal price spread, with the target price increased by 9% to RMB 35. All of the above stocks are rated "Buy."