Morgan Stanley cuts oil price forecast again

Just two weeks after dropping its forecast for Brent oil prices to $80 a barrel for the fourth quarter, Morgan Stanley has cut its forecast again, now expecting the international benchmark to average $75 a barrel in the last quarter of the year.

Analysts at Morgan Stanley see headwinds from the demand side, which was their key reason for cutting their Q4 oil price forecast.

“The recent trajectory of oil prices bears similarities to other periods of considerable weakness in demand,” Morgan Stanley analysts wrote in a Monday note published by Bloomberg.

Time margins on the oil futures curve signaled “recession-like inventory gains,” analysts noted.

However, they wrote that it is too early to be part of Morgan Stanley’s base scenario.

Monday’s downward revision to oil price forecasts is Morgan Stanley’s second such cut in just over two weeks.

In late August, the Wall Street bank cut its fourth-quarter Brent price forecast to $80 a barrel, down from $85 previously expected.

At the time, Morgan Stanley said the forecast for lower oil prices reflected expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank anticipates that while the crude oil market will remain tight in the third quarter, it will begin to stabilize in the fourth quarter and potentially move into surplus by 2025.

In early Asian trade on Monday, Brent crude oil prices traded just below $72 a barrel after settling at just above $71 on Friday – the lowest level since June 2023.

Morgan Stanley isn’t the only major investment bank to cut its oil price forecasts in recent weeks.

Goldman Sachs cut its expected range for Brent oil prices by $5 to $70-$85 a barrel amid weaker Chinese oil demand, high inventories and rising U.S. shale production.

Citi, for its part, sees oil prices at $60 a barrel next year if OPEC+ fails to implement more output cuts amid slowing demand and strong supply from non-OPEC producers.

By Tsvetana Paraskova for Oilprice.com

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