Morgan Stanley has raised its Brent crude price forecasts for the coming quarters, saying Middle East supply is recovering more slowly than expected, leaving the oil market in deficit throughout the fourth quarter of 2026 and first quarter of 2027.
* “Crude is tightening. Recent weeks have seen one of the sharpest declines in oil-on-water, whilst onshore inventories are declining as well, including in China,” Morgan Stanley said in a note on Sunday.
* The bank sees a more drawn-out Middle East supply recovery, leaving the market in deficit throughout 4Q and 1Q, it said, adding that they revise their Brent forecasts higher, peaking at $100/b in 4Q.
* The bank forecasts Brent oil at $90 per barrel in the Q3 2026, $100 in Q4 2026, $95 in Q1 2027 and $90 in Q2 2027, versus its previous assumption of $75 for all these quarters.
* “We slow our assumption for Middle East supply recovery, which now takes well into 2027 on our new estimates,” the bank said.
* Oil prices slipped more than $1 a barrel on Monday as investors took profits ahead of an expected announcement from Washington about imposing more sanctions on Iran that may further disrupt supplies from the Middle East.
* Both contracts posted their second consecutive weekly gains last week, up more than 5%, as peace talks between the U.S. and Iran hit a stalemate, capping oil shipments through the Strait of Hormuz, which a fifth of the world’s supply used to transit.
* Morgan Stanley also highlighted an unusual gap between crude and refined products, with the ICE gasoil contract trading near $175 a barrel against Brent at about $92, producing an all-time-high crack spread of $75.
(Reporting by Dharna Bafna and Swati Verma in Bengaluru; Editing by Hugh Lawson)