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Wednesday, June 7, 2023



Morgan Stanley Cuts Oil Price Forecast After OPEC+ Decision

While some analysts started talking about $100 after the surprise OPEC+ cuts, Morgan Stanley is going the other way, and is cutting its price forecasts for this year and next, viewing the latest move as a probable admission from the biggest producers in OPEC+ that demand may not be doing too well in the coming months, OilPrice reports.

“OPEC probably needs to do this to stand still,” Martijn Rats, chief commodity strategist at Morgan Stanley, said in a note available to pro subs.

However, the decision “reveals something, it gives a signal of where we are in the oil market. And look, let’s be honest about this, when demand is roaring…then OPEC doesn’t need to cut,” Rats noted. 

So the U.S. bank cut its Brent Crude forecast for the second quarter of 2023 to $85 from $90 a barrel previously expected. The third-quarter forecast was also cut by $5 a barrel—to $90 from $95, while the fourth-quarter price estimate was slashed to $87.50 from $95 per barrel.

Morgan Stanley also slashed its forecast for Brent’s 2024 average to $85 from $95 a barrel.

Citigroup doesn’t see $100 oil soon, either.

Oil prices are not going anywhere near $100 per barrel despite the latest production cuts announced by members of the OPEC+ group, as U.S. supply growth and uncertainty in the Chinese demand growth path will keep the market fairly balanced, Ed Morse, global head of commodities research at Citigroup, told Bloomberg on Monday. 

While Citi and Morgan Stanley are more bearish on oil, Goldman Sachs and Energy Aspects have turned more bullish after the shock OPEC+ announcement.

The surprise OPEC+ cuts are making oil balances look “insanely bullish” for later this year, provided that the global economy holds up, Amrita Sen, founder and director of research at Energy Aspects, told CNBC on Monday.

Goldman Sachs, for its part, on Monday raised its Brent Crude forecast to $95 from $90 at the end of the year. The bank also raised its Brent Crude forecast for 2024, now seeing it at $100 at the end of the year from an earlier projection of $97.

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