UBS lifts oil price forecast, names Santos and Origin as top stocks

The news: UBS has lifted its near-term oil price forecast to USD105 ($145) per barrel for the third quarter and USD90 barrel for the fourth quarter on the back of the extended closure of the Strait of Hormuz, assuming shipping volumes through the transit passage remain severely reduced until at least the end of July.

The context: USB analyst Tom Allen, however, warned that as inventories edge closer to critical levels over the next two months, oil prices could briefly surpass USD120 per barrel.

Despite the lift in oil, UBS has trimmed its liquefied natural gas price forecast, noting that weaker demand, fuel switching and additional US supply all help mitigate the loss of roughly 17% of Qatari supply.

The research firm named Santos as its most preferred Australian oil and gas exposure, noting the stock remains undervalued. UBS also maintains a neutral rating on Woodside, a sell rating on Beach Energy, and holds Origin Energy as its most preferred utility stock.