Morgan Stanley has slashed its oil price forecasts for the next 18 months as it expects the reopening of the Strait of Hormuz to accelerate a new supply glut.
The return of oil supply from the Middle East, combined with high U.S. oil exports and still weak Chinese crude purchases, will bring the market full circle to a new glut in the coming months, according to the bank’s analysts, who slashed their oil price projections for the second time in two weeks.
Morgan Stanley now expects Dated to average $75 per barrel in the third quarter this year, a downward revision of $15 a barrel from the previous forecast, in a note cited by Bloomberg.
The average Dated Brent price, the benchmark for physical transactions, is set to average $75 per barrel in the fourth quarter, too, according to the analysts. This is $5 a barrel lower compared to the previous projection from the middle of June, when Morgan Stanley and other major investment banks slashed their price forecasts after the U.S. and Iran signed a memorandum of understanding to negotiate a deal within 60 days.
Morgan Stanley now expects a Dated Brent price of $70 per barrel at the end of 2027.
“As attention turns to 2027, the market has come full circle – back to surplus,” the bank’s analysts wrote in the note.
Separately, Goldman Sachs has cut its price forecast for the fourth quarter to $80 per barrel from $90 per barrel, and the 2027 average forecast for Brent crude to $75 per barrel from $80 in earlier forecasts. According to the bank’s commodity analysts, tanker traffic via the Strait of Hormuz would recover fully by the end of July.
Goldman has also warned that tanker traffic via the Strait of Hormuz may never fully recover to pre-war levels thanks to alternative routes that oil producers in the Middle East have tapped amid the crisis.
