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Morgan Stanley Ups Oil Price Forecast On Supply Fears

  • Morgan Stanley ups oil price forecast by $10 per barrel.
  • Morgan Stanley raises amount of lost Russian supply to 2 million bpd.
  • Morgan Stanley adjusts its forecast for returning Iranian supply.
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Morgan Stanley revised its oil price forecast upwards for the second half of the year by $10 per barrel, citing the greater than expected supply deficit resulting from Western sanctions against Russia.

Bloomberg reported that the investment bank had estimated a supply gap of 1 million bpd in the third and fourth quarter, which would keep prices higher, with Brent seen averaging $130 per barrel during that period.

Morgan Stanley also forecasted that the amount of Russian oil supply lost would be some 2 million barrels daily in both crude and condensates. That’s up from an earlier estimate of 1 million bpd in oil and condensates in lost Russian supply.

The investment bank’s analysts noted that Russia’s oil production had already shed close to 1 million bpd this month, which came earlier than expected. There is also a risk of price hikes due to a possible EU oil embargo.

In the meantime, Morgan Stanley adjusted its forecast for returning Iranian supply amid stalled negotiations on the nuclear deal. The latest from that front is that the Iranian side had rejected U.S. offers for sanctions relief in exchange for abandoning plans to avenge the death of General Qassem Soleimani, commander of the Quds Force. The U.S. side, meanwhile, insists on Iran addressing more than just U.S. concerns about its nuclear program.

The Iran talks, then, have hit a wall, and Morgan Stanley has adjusted its expectations for it happening at all to 50/50.

Demand, meanwhile, is expected to slow, likely under the pressure of higher prices. The Morgan Stanley analysts revised their demand growth forecast for this year to 2.7 million barrels daily from 3.4 million barrels daily. The bank cited downward revisions in global economic growth and China’s zero-Covid policy that earlier this year promoted massive lockdowns that shrank oil demand temporarily.

By Irina Slav for Oilprice.com

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