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Just two weeks after lowering its Brent oil price estimate to $80 per barrel for the fourth quarter, Morgan Stanley cut again its forecast, now expecting the international benchmark to average $75 a barrel in the last quarter of the year.
Analysts at Morgan Stanley see rising headwinds on the demand side, which has been their key reason for cutting their Q4 oil price forecast.
“The recent trajectory of oil prices has similarities to other periods with considerable demand weakness,” Morgan Stanley analysts wrote in a Monday note carried by Bloomberg.
The time spreads on the oil’s futures curve have been signaling “recession-like inventory builds,” the analysts noted.
However, they wrote that it was too early to make that part of Morgan Stanley’s base-case scenario.
Monday’s downward revision to oil price forecasts is Morgan Stanley’s second such cut in a little over two weeks.
At the end of August, the Wall Street bank cut its Brent price forecast for the fourth quarter to $80 per barrel, down from $85 expected earlier.
Back then, Morgan Stanley said that the lowered oil price forecast reflected expectations of increased supply from OPEC and non-OPEC producers amid signs of weakening global demand. The bank anticipates that while the crude oil market will remain tight through the third quarter, it will begin to stabilize in the fourth quarter and potentially move into a surplus by 2025.
Early on Monday in Asian trade, Brent Crude prices traded at just below $72 per barrel, after settling on Friday at just above $71—the lowest level since June 2023.
Morgan Stanley isn’t the only major investment bank to have cut its oil price forecasts in recent weeks.
Goldman Sachs has lowered its expected range for Brent oil prices by $5 to $70-$85 per barrel, on the back of weaker Chinese oil demand, high inventories, and rising U.S. shale production.
Citi, for its part, sees $60-per-barrel oil prices next year if OPEC+ fails to implement more production cuts, amid slowing demand and strong supply coming from non-OPEC producers.
