Oil prices remained steady as ongoing negotiations between the US and Iran, coupled with the normalization of crude shipments through the Strait of Hormuz, took center stage. Goldman Sachs and Morgan Stanley have both indicated a rising risk of oversupply and weaker oil prices. This outlook is attributed to the anticipated recovery in logistics through the Strait of Hormuz, increased US oil supply, and a slowdown in demand from China. Brent crude futures were trading near $70 a barrel, while West Texas Intermediate (WTI) was near $70 a barrel.
Financial institutions are revising their forecasts, with Morgan Stanley cutting its oil price predictions twice in the last two weeks, citing a faster-than-expected recovery in crude flows through the Strait of Hormuz, a rise in US supply, and slowing demand from China. Goldman Sachs analyst Samantha Dart stated that the global oil market is expected to enter a period of oversupply once flows through the Strait of Hormuz normalize, anticipating a surplus averaging just over three million barrels a day in 2027. This perspective aligns with Morgan Stanley's view that the market is returning to surplus conditions.
Supply-side pressures are intensifying, with Iran reporting exports of over 40 million barrels of crude following the lifting of the US maritime blockade. Russia's crude exports have also reached record levels, contributing to a rapid increase in floating inventories. While purchases of crude to replenish strategic reserves are expected to provide some market tightening, they are only projected to partially offset the anticipated glut, with roughly one million barrels a day of Strategic Petroleum Reserve (SPR) rebuilding globally, still leaving a surplus of close to two million barrels a day. Geopolitical uncertainty persists, however, due to Iran's stance on controlling the Strait of Hormuz and unresolved issues such as nuclear negotiations and the situation in Lebanon.
