Morgan Stanley: Oil Prices Will Hit $100 Next Quarter

Oil prices will rise again to $100 per barrel faster than previously estimated, Morgan Stanley said on Thursday, lifting its price forecast for the first quarter of 2023 to $100 from $95 per barrel.

“Brent will find its way to $100 per barrel quicker than we estimated before,” the investment bank said in a note carried by Reuters after OPEC+ decided on Wednesday to make the largest nominal cut to its oil production quota since 2020.  

OPEC+ agreed on a 2-million-bpd cut from November, but the actual reduction in supply from the alliance is estimated at around 1 million bpd-1.1 million bpd, considering that many producers haven’t pumped to quotas for months because of a lack of capacity and/or investment, or – in Russia’s case – because of sanctions. Most of the actual cuts will come from Saudi Arabia and other Gulf producers.

Morgan Stanley sees the deficit on the oil market swelling to 900,000 bpd next year, up from the 200,000 bpd deficit previously expected.

“Those forecasts assume that Russia’s oil production will fall by 1-1.5 million bpd after the EU oil import embargo comes into force,” Morgan Stanley’s strategists said.

Other banks also reacted to the OPEC+ cut with increased oil price forecasts. Goldman Sachs, for example, raised its Brent Crude forecast for this quarter by $10 to $110 per barrel.

“All the developments we have seen on the supply side at this point very much sets the stage for what we believe will be higher prices into the end of this year,” Damien Courvalin, head of energy research at Goldman Sachs, told Bloomberg TV.   

“Given the large supply cut recently announced by OPEC+, the global market will likely be in deficit through the whole of 2023, suggesting that there is upside to our current forecasts,” Warren Patterson, Head of Commodities Strategy at ING, said on Thursday. The bank currently sees Brent trading largely within the $90 area for the remainder of this year and into the first half of 2023 before strengthening over the second half of 2023. 

By Tsvetana Paraskova for Oilprice.com

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