Morgan Stanley Lowers Oil Forecast Once More Due to Growing Market Concerns

Morgan Stanley has updated its projection for the price of Brent crude once more, taking into account growing worries about both an ample supply and the demand for oil globally. According to the investment bank’s latest forecast, Brent oil prices will average $75 per barrel in 2024’s fourth quarter. This is the second cut that has been made in recent weeks, the first being the prior estimate of $80 per barrel, which was lowered from $85.

A number of analysts, like Martijn Rats, blamed the reduction on indications of a possible recession in the US economy as well as declining demand, especially from China. The Organization of the Petroleum Exporting Countries (OPEC+) decided to postpone measures to lift production curbs because oil output is still strong in the interim.

Analysts at Morgan Stanley pointed out similarities between the state of the oil market now and previous downturns in demand. As they noted in their September 9 analysis, price spreads throughout the futures curve indicate “recession-like inventory builds.” They did stress that it is premature to declare this to be their default scenario.

Concerns about oil prices have also been voiced by other significant financial firms. Citigroup and Goldman Sachs recently revised down their projections, indicating that the market may be oversupplied and that, unless more drastic production cutbacks by OPEC+, prices may fall below $60 per barrel by 2025.

Monday saw Brent crude trading at about $72 per barrel after falling over 10% the week before. The continuous volatility draws attention to the precarious equilibrium between supply and demand in the world oil market.