Investing.com-- UBS has raised its oil price forecast slightly, pointing to geopolitical risks, but cautioned that the market faces growing surpluses as OPEC+ boosts supply and seasonal demand wanes.

UBS raised its 2025 Brent crude oil price forecast by $1 to $67 per barrel. Analysts noted that oil prices surged briefly above $80 a barrel after Iran-Israel attacks in the second quarter but have since retreated.

The bank now expects Brent to average $65 in Q3, up $3 from its previous forecast, but sees prices dipping to the low-$60s by late 2025.

"With disruption to Middle East oil supply no longer looking like an immediate risk, we expect the oil market’s focus to shift back to fundamentals and the picture still looks bearish near-term," analysts wrote.

The bank anticipates larger surpluses as oil-producing cartel OPEC+ unwinds production cuts, with an expected output hike in August.

UBS highlighted potential downside risks, including weaker demand and further OPEC+ supply increases, which could push Brent below $60. However, renewed geopolitical tensions or tighter compliance with OPEC+ cuts could provide temporary upside, it added.

"Key dates to watch include the 6 July OPEC+ decision on August production level but we see the following decision in early August as a more important indicator," UBS analysts said.