Morgan Stanley cuts oil target for second time in a month as prices fall to 2024 lows

Wall Street turned gloomier for oil prices as signs of weak demand and plentiful supply weighed on the crude market.

On Monday, Morgan Stanley cut its Brent (BZ=F) forecast for the second time in a month, citing recent price declines that signal the risk of “considerable weakness in demand.”

Analysts now forecast Brent to average $75 in the fourth quarter of this year, down $5 from earlier, downwardly revised forecasts of $80 issued in late August.

On Monday, West Texas Intermediate (CL=F) traded near $68 a barrel, while Brent, the international benchmark, is nearing $71 a barrel.

“Oil prices have recently followed a path that resembles periods of considerable demand weakness, and calendar spreads are already consistent with recession-like inventory ahead,” equity analyst and strategist Martijn Rats and his team wrote Morgan Stanley commodities.

Despite recent price trends, analysts said “demand indicators are concerning, but it is too early to make ‘recession-like’ demand the base case.”

Rats and analysts pointed to a desire on the part of OPEC+ to balance the market. Last week, the oil alliance delayed by two months the start of voluntary cuts originally scheduled to begin in October.

Other Wall Street firms cut their expectations for crude oil prices, mainly due to weak demand from China, the biggest crude importer.

JPMorgan recently cut its fourth-quarter forecast from $85 to $80, citing “oil’s strong performance” in August.

Last month, Goldman Sachs cut its 2025 forecast for Brent by $5 a barrel to a range of $70-85.

Growing signs of economic cracks in the US and Europe, where the summer driving season has broken out, also weighed on prices. Falling oil has helped precipitate a slide in U.S. gas prices, too, with at least one analyst predicting the national average will fall to $3 by the end of the year.

Crude recently hit a 2024 low, erasing all gains to date.

Despite an overall market rally on Monday, WTI is down about 3% year-to-date and nearing its lows for the year. Brent crude fell about 5% over the same period.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow X at @ines_ferre.