Morgan Stanley Sees Oil Prices Dropping to the Mid-$70s Next Year

Oil prices are expected to drop to the mid-$70s next year amid a surplus on the market, according to Morgan Stanley.

Currently, the oil market is tight and warrants the $80s per barrel price range, but with seasonal demand starting to abate in the fourth quarter, market balances are set to return, the investment bank said in a note carried by Reuters on Monday.

In the fourth quarter of 2024, the market would be balanced “when seasonal demand tailwinds abate and both OPEC and non-OPEC supply return to growth,” Morgan Stanley’s analysts wrote. 

Next year, the market will even tip into a surplus amid rising supply from both OPEC+ and non-OPEC+ producers, the bank’s commodity strategists reckon.

According to the bank, global refinery runs will hit their 2024 peak in August and are not expected to reach this level again until July next year. 

That’s why Morgan Stanley expects Brent Crude prices to drop from current levels to the mid $70s to high $70s per barrel range in 2025.  

Early on Monday, Brent Crude prices were up by 0.52% at $83.07, while the U.S. benchmark, WTI Crude, was trading 0.49% higher at $80.46.

Morgan Stanley reiterated in the note its price forecast of $86 per barrel Brent oil for the third quarter of 2024.

Goldman Sachs has also recently reaffirmed its outlook from June that

Brent crude prices are set to rise to $86 per barrel this summer amid strong consumer demand which will put the market into a sizeable deficit in the third quarter.

The Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel monitoring the oil market, is not expected to recommend in August any changes to the current production policy plan of the group, OPEC+ delegates told Bloomberg last week.    

When the panel meets again on August 1, the meeting is expected to be a routine one, and no recommendations on oil production policy – other than the OPEC+ group has already announced – are expected to be issued, according to Bloomberg‘s anonymous sources among the OPEC+ delegates.  

By Tsvetana Paraskova for Oilprice.com

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