Oil Market To Balance In 2Q, Turn Tight In 3Q Amid China Demand: Morgan Stanley

Morgan Stanley expects the oil market to balance in the second quarter and to tighten during the third and fourth quarter of 2023, supported by Chinese oil demand recovery.

• "We see the oil market coming into balance in 2Q and turning tight in 3Q and 4Q, supporting higher prices later this year," the bank said in a note dated Wednesday, with uncertainties such as China's re-opening, recovery in aviation, risks to Russian supply, slowdown in US shale and the end to SPR releases "turning into tailwinds."
• Morgan Stanley expected oil prices to average $80-85/bbl in the first quarter, before reaching $110/bbl by the end of the year.
• Goldman Sachs this week cut its 1Q23 Brent oil price forecast to $90/bbl, and expects prices to rise to $110/bbl in 3Q.
• "We peg the upside to oil demand in China due to 're-opening' at close to 1mbnpd, to be realised progressively throughout the year," Morgan Stanley said, adding it expected the country's re-opening to also accelerate the recovery in aviation demand.
• China scrapped its strict zero-COVID measures last month, lifting lockdowns, removing quarantine, and halting regular testing which fuelled Chinese demand recovery hopes.