Morgan Stanley Lower Brent Forecast as Some Others Revised Higher

Counter to several other major banks, Morgan Stanley has lowered its oil price forecast due to soft demand prospects for the second half of the year. Morgan Stanley forecasts Brent at 87.5$/bbl in Q4 2023 down from its previous forecast of 95$/bbl.

• They see demand softer than anticipated with China’s fuel consumption remaining broadly unchanged since the easing of covid restrictions.
• They still see a market deficit in the second half of the year but driven by the unexpected OPEC production cuts instead of fundamental tightening. Inventory draws will likely support some upside to Brent prices to around 90$/bbl.
• Goldman Sachs yesterday suggested the OPEC cut could drive a significantly larger deficit in the market pushing prices to 100$/bbl by April 2024. The deficit from June onward will be due to rapid emerging market growth, falling Russia supply, and sluggish US supply.
• They see “elevated OPEC pricing power - the ability to raise prices without significantly hurting its demand - as the key economic driver.”
  • Morgan Stanley Brent price forecasts:
  • 85$/bbl in 2Q 2023, down from 90$/bbl
  • 90$/bbl in 3Q 2023, down from 95$/bbl
  • 87.5$/bbl in 4Q 2023, down from 95$/bbl
  • 85$/bbl in 2024, down from 95$/bbl