BofA positive on LT oil outlook, views N. American OFS names positively
Investing.com – Iran named Mojtaba Khamenei as the country’s new supreme leader on Monday, with the son of late leader Ali Khamenei believed to hold even more hard-line views than his father. The Strait of Hormuz is effectively blocked, forcing regional storage to fill rapidly and pushing front-month Brent crude above $105 per barrel and TTF gas above €60 per megawatt-hour.
Iraq and Kuwait have curtailed production due to the Hormuz blockage and rapidly filling regional storage. Qatar has stopped operations at its liquefied natural gas facilities. Saudi Arabia and the United Arab Emirates have relatively more flexibility to reroute exports but may be forced to partially curtail production if Hormuz remains blocked.
BofA reports rig and activity suspensions in Qatar and Kuwait offshore operations, Iraq onshore operations, and to a lesser extent UAE offshore operations. Saudi Arabia operations appear to be business as usual for now. The disruptions could lead to lower activity and higher costs in the Middle East for oilfield services companies, weighing on first-half 2026 profitability.
The supply disruption has been active for nine days and BofA estimates approximately 30 days will be needed to fully normalize oil and LNG supplies. The bank previously identified regime hard-lining as the most bullish scenario for crude oil in its March 1, 2026 report, projecting an extended regional Middle East war could push Brent above $100 per barrel.
BofA expects the disruption to meaningfully tighten supply and demand balances and inventory for the remainder of 2026. A protracted Iran conflict or ceasefire that keeps the hard-line regime in place could sustain a prolonged geopolitical risk premium in oil prices, which the bank views as positive for oilfield services in the medium and long term, especially for North American land operations and offshore deepwater drilling.
