Morgan Stanley has once again reduced its forecast for Brent crude prices, citing a mix of weaker global demand and ample supply. This is the second downward revision in just a few weeks, according to Bloomberg, highlighting the increasing concerns within the market about oil supply and demand.
The bank now expects Brent crude to average $75 per barrel in the fourth quarter of 2024, down from the $80 it forecasted last month and an earlier estimate of $85.
The revision comes as Brent crude prices have experienced a significant decline – currently trading at around $72 per barrel.
The market is facing growing pressure from faltering demand, especially from major economies such as China, combined with fears of a slowing U.S. economy.
The oil market’s current trajectory is reminiscent of previous periods of weak demand, according to Morgan Stanley analysts. The bank observed that the time spreads on the futures curve suggest a “recession-like” buildup in oil inventories. However, it remains cautious in labeling a global recession as the base-case scenario just yet.
Other banks have also slashed Brent forecasts
Morgan Stanley is not alone in its bearish outlook. Citigroup, too, has expressed concerns about an oversupplied market, predicting Brent prices could average $60 a barrel by 2025 unless OPEC+ makes deeper cuts. Other major financial institutions, including Goldman Sachs and Bank of America, have also slashed their forecasts.
Goldman Sachs has revised its range for Brent prices to $70-$85 per barrel, while Bank of America has cut its 2025 estimate by $5, now expecting prices to settle around $75 per barrel.
Weak global demand and oversupply cited as factors
The key driver behind these revisions has been persistent weakness in global demand and the likelihood of oversupply, particularly as production from non-OPEC countries increases.
OPEC+ has also been navigating complex market conditions. Despite initially planning to ease its production cuts, the group has delayed any increases due to the current market surplus and weak demand and in anticipation of a potential future surplus.