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Westpac: Oil to Average $85 in Q4 2026
Westpac sees crude averaging $85 in Q4 2026 as ceasefire hopes unwind the supply premium. The bank points to slowing demand and rising OPEC+ output. Next test: the June OPEC+ meeting.
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Oil prices have fallen sharply over the past week, with crude trading near $84.23 a barrel on Friday. That is down more than 11% from this month's peak above $95. The trigger was growing optimism around a Middle East ceasefire, which reduced the risk premium that had built into prices during the earlier escalation.
Westpac now expects prices to ease further. The bank's latest forecast calls for crude to average $85 a barrel in the fourth quarter of 2026. That implies a continued drift lower from current levels, even after this week's selloff.
The ceasefire talks have been the dominant driver. When the conflict escalated, traders priced in a meaningful chance of supply disruptions from the Strait of Hormuz. Those fears have receded as diplomatic channels opened. The premium that had been baked into futures contracts unwound quickly.
Westpac's view rests on more than geopolitics. The bank sees demand growth slowing as global economic momentum fades. At the same time, OPEC+ is expected to begin unwinding some of its production cuts later this year, adding to supply. The combination points to a market that is adequately supplied through 2026, with prices trending lower.
For currency traders, the oil price path matters. A sustained decline in crude would ease inflation pressures in consuming nations, potentially giving central banks more room to cut rates. That would be a negative for commodity-linked currencies like the Canadian dollar and the Norwegian krone, which have already weakened this week. The forex market analysis section tracks these cross-asset moves.
The near-term risk is that the ceasefire optimism fades. If talks stall or break down, the supply premium could return quickly. That would push prices back toward $90 and test the Westpac forecast. For now, the data supports the easing view. US crude inventories have risen in recent weeks, and refinery demand has softened.
The next scheduled OPEC+ meeting is in early June. That will be the first formal test of the group's production strategy for the second half of the year. Until then, the ceasefire narrative and weekly inventory reports will drive the short-term direction.