Morgan Stanley, alongside other major banks like Goldman Sachs, has reduced its oil price forecasts for the coming quarters. This revision is largely attributed to the rapid and successful reopening of the Strait of Hormuz following an interim deal, which has led to a quicker-than-anticipated return of crude output from the Middle East. While an earlier Bloomberg report indicated Morgan Stanley expected Brent to be supported around $90 in Q3 and at or above $80 into next year, more recent adjustments reflect the significant impact of the reopened Strait.
The bank's adjusted forecasts include a cut in Brent prices from $100 to $90 per barrel for Q3 2026, and from $95 to $80 for Q4 2026. This comes as physical oil markets are already showing signs of oversupply, with Angolan crude selling at nearly $10 a barrel below the Dated Brent benchmark. The oversupply is so pronounced that some Chinese refiners are reportedly offering oil cargoes for sale, a stark reversal of typical market dynamics.
Despite the immediate oversupply, Morgan Stanley's analysts, including Martijn Rats, acknowledge that the physical reality is more complex than price action suggests. They anticipate that it will take several weeks for tanker flows to normalize fully. However, the bank also highlighted in a previous note that the market would still face an average deficit of approximately 3.4 million barrels per day in Q3 and emphasized the need to replenish global inventories that have been significantly drawn down since the conflict began, which are well below five-year averages.
The swift return of supply, particularly from the Persian Gulf, has reversed earlier market tightness and pushed global Brent benchmark prices below $75 a barrel for the first time since the war started. The firm's analysis indicates that while current market conditions point to oversupply, the need to rebuild strategic oil inventories depleted during the conflict could absorb some of this excess later, potentially leaving the system vulnerable to new disruptions despite the current oversupply.
