Morgan Stanley hikes Q3 outlook to $94 as Brent hovers over $90/bbl
Morgan Stanley has raised its Brent crude oil price forecast for the third quarter of this year by $4 per barrel to $94, citing geopolitical risks. “That the degree of geopolitical risk in key oil producing regions has increased recently seems clear and uncontroversial,” said the leading investment bank in a recent note.
Brent crude futures rose to just above $90 a barrel last week after hopes faded that talks between Israel and Hamas would lead to a ceasefire in Gaza amid concerns the lingering conflict could disrupt supply from the key Middle East producing region.
The elevation in crude prices also comes as OPEC, the group comprising the Organization of the Petroleum Exporting Countries and allies led by Russia (OPEC+), last kept its oil supply policy unchanged and pressed some countries to increase compliance with output cuts.
Morgan Stanley said that with OPEC supply restraints, some downside to Russia production, and a seasonal upswing in demand ahead, it expects tightness in the second and third quarters. Ukrainian strikes on Russian refineries may have disrupted more than 15 per cent of Russian capacity, said a NATO official earlier this month.
Analysts remain bullish on crude prices over geopolitical risks
Crude oil has been on an upward momentum for the last 10 weeks, experiencing a downturn only for two weeks during this period. Apart from geopolitical tensions in the Middle East, the global supply is challenged due to OPEC cuts and supply disruptions in various parts of the world, including Libya and Venezuela.
Some countries are restricting the supply of crude, as they intend to refine it domestically, for example, Mexico. Additionally, some OPEC countries are limiting output because they exceeded their production quotas in the last few months. This includes Iraq, Nigeria, and the UAE.
‘’Given all these factors, we do not anticipate any significant downside in crude oil shortly. We anticipate that OPEC may expand output by 0.5 million barrels per day if the crude oil market continues to be in deficit. Hence, our base case is for crude to trade in a range from $85 to $95 levels in the near future,” said Mr. Amit Goel, Co-Founder & Chief Global Strategist, Pace 360.
With demand holding up and growing in CY 24, the crude oil market faces a deficit of almost one million barrels a day. Russell Hardy, chief executive officer of Vitol Group, the world’s largest independent trader, said his firm now expects demand growth of 1.9 million barrels a day this year, which is more than 30 per cent higher than the current view of the International Energy Agency (IEA).
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Published: 11 Apr 2024, 09:02 PM IST
