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Geopolitical Risks Support Oil Outlook, Offshore Stocks Remain Attractive, TPH Energy Says

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Middle East tensions pushed West Texas Intermediate crude above $80 per barrel last week as geopolitical risks supported oil prices, TPH Energy said in a Monday note.

Investors are watching whether Iran will direct the Houthis to shut the Bab al Mandab Strait after Iranian officials warned they could respond if the US targets the country's energy infrastructure, the report said.

TPH expects crude to average between $75/bbl and $80/bbl in 2027 but sees additional upside if the Strait of Hormuz or Bab al Mandab Strait closes, Strategic Petroleum Reserve releases end or China returns to the oil market.

TPH initiated coverage of Transocean (RIG) and Noble (NE) with Buy ratings and upgraded EQT (EQT) to Buy last week as marketing activity remained strong across the continent.

Investors continued favoring offshore drillers as US shale showed signs of maturing, increasing expectations of a shift toward international and offshore projects, TPH said.

TPH said hedge funds largely maintained underweight positions in natural gas because upstream producers continue pursuing production growth despite weakening long-term returns.

TPH expects challenging natural gas fundamentals to persist through 2027 as prices approach levels where producer returns become unattractive and cash flows for some companies fail to cover even maintenance spending.

TPH recommends investors gradually rebuild positions in gas-focused equities despite near-term headwinds, citing meaningful upside in forward natural gas prices beyond 2028.

Price: $5.20, Change: $+0.06, Percent Change: +1.23%

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